Tata group may sell auto parts unit Tata AutoComp Systems
MUMBAI: Tata group is planning to sell its automotive parts manufacturing company Tata AutoComp Systems Ltd (TACO), two people aware of the matter said.
The group is currently in talks to hire an investment bank to manage the sale, the first of the two said on condition of anonymity. The sale process is expected to start in a month, the person added.
N Chandrasekaran, who completed a year as Tata Sons Ltd chairman on Wednesday, plans to divest companies that are not making money and allocate capital to businesses where the group’s prospects are brighter.
Pune-based Tata AutoComp, a subsidiary of Tata Motors Ltd, has more than 33 manufacturing facilities across India and China, and five joint ventures in partnership with leading global auto parts makers.
Major customers of Tata AutoComp include Ashok Leyland, BMW India, MercedesBenz India, Eicher Motors, Fiat, Ford India, Hero Honda, Mahindra and Mahindra, Piaggio, Royal Enfield, Skoda, Swaraj Mazda, Tata Motors and Toyota Kirloskar Motor Pvt. Ltd.
“We do not comment on market speculation,” said a Tata Sons spokesperson said.
Tata Motors managing director and CEO Guenter Butschek declined to comment on Tata AutoComp, but said that the Tata group plans to sell units that do not make sense to its overall business, he said. “For our business, and for Tata Motors in particular, what is core and what is not core is very critical and the point is if you need to clean the past, you need to go for the right calibrated approach for the future,” he said. “We have a blueprint as far as all of our subsidiaries are concerned. We will take them up line item by line item to arrive on a decision.” The company competes with Amtek Auto, Bharat Forge Ltd and Motherson Sumi Systems Ltd.
According to Automotive Component Manufacturers Association of India (Acma), the auto component industry clocked an annual average growth of 7% to touch ₹2.92 lakh crore in 2016-17. Out of this, passenger vehicles (passenger cars, utility vehicles and vans) contribute 49% while two wheelers (scooters, motorcycles and mopeds) contribute 22%.
The domestic auto component industry is expected to grow by 9-11% during FY2018, led by demand from passenger vehicle and two wheeler makers, said a December 2017 note by Icra Ltd.
Tata Motors has undertaken a turnaround plan under Butschek and Chandrasekaran. The plan involves reducing costs and increasing efficiency of the firm.
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Tata Group plans divestment of the units which do not make sense to the overall business
GUENTER BUTSCHEK, Tata Motors MD and CEO