Scal­ing Up

The Economic Times - - Special Feature - N SHIVAPRIYA

Com­pany: In­vestor: Kohlberg Kravis Roberts (KKR) In Al­liance Tire Group, buy­out firm Kohlberg Kravis Roberts (KKR) is help­ing en­tre­pre­neur Yogesh Ma­hansaria scale the com­pany up from where pre­vi­ous in­vestor, War­burg Pincus, left off. Be­tween 2005 and 2013, War­burg Pincus helped kick­start the com­pany’s tyre busi­ness with an ac­qui­si­tion in Is­rael, an­other of a bank­rupt com­pany in the US, and in set­ting up a green­field plant in Tirunelveli, Tamil Nadu, be­fore sell­ing its 80% stake to KKR in Au­gust 2013.

KKR is tak­ing a proac­tive ap­proach in Al­liance, sim­i­lar to what War­burg took. KKR is lev­er­ag­ing its global pres­ence to help beef up sales in US and Europe, Al­liance’s pri­mary mar­kets, and is re­mov­ing bot­tle­necks at the com­pany’s fac­to­ries in In­dia to im­prove pro­duc­tiv­ity. “While War­burg’s in­puts were mainly strate­gic, KKR is also en­gag­ing with us on an op­er­a­tional level,” says Ma­hansaria, who now owns 10% of Al­liance.“Aswith­anyy­oung­com­pa­nythathas­grown very fast and through ac­qui­si­tions, sys­tems and pro­cesses lag a lit­tle.”

Two KKR em­ploy­ees are present at Al­liance’s fac­to­ries, help­ing the com­pany ramp up ca­pac­ity, and stream­line sys­tems and pro­cesses. For a time, Akhil Puri, In­dia head of KKR’s Cap­stone (an op­er­a­tions team within the PE firm), also of­fi­ci­ated as COO of Al­liance af­ter the ear­lier COO quit. “A global firm like us can re­ally help the en­tre­pre­neur take this busi­ness to the next level in terms of op­er­a­tional ex­cel­lence and pen­e­trat­ing the over­seas mar­kets even more,” says San­jay Nayar, CEO of KKR In­dia.

In the US, where Al­liance is rel­a­tively younger, the chal­lenge for the com­pany is to ex­pand its foot­print, while in Europe, where it has a long his­tory, the chal­lenge is to in­crease wal­let-share with cus­tomers. “They (KKR) have been able to en­gage across our plants in In­dia and Is­rael, and sales teams in US and Europe, to help us speed up our growth plans,” says Ma­hansaria, who has fol­lowed the un­usual model of be­ing the mi­nor­ity pro­moter and ced­ing ma­jor­ity con­trol to fi­nan­cial in­vestors to take his busi­ness to the big league.

Al­liance, which is pri­vately held, has an­nual rev­enues of about $500 mil­lion (Rs 3,000 crore). It is cur­rently ranked in the fifth or sixth po­si­tion, glob­ally, in off-high­way tyres for agri­cul­ture and con­struc­tion. Ma­hansaria wants to grow the busi­ness to $1 bil­lion rev­enues or­gan­i­cally and about $2-3 bil­lion through ac­qui­si­tions, mov­ing to the num­ber one or num­ber two rank­ing glob­ally.

This is where KKR’s in­her­ent strengths can come into play—through its global net­work of con­nec­tions of board mem­bers and CEOs, the PE ma­jor can help Al­liance find the right ac­qui­si­tion op­por­tu­ni­ties. Ad­di­tion­ally, it can act as the ex­tended man­age­ment team and help think through the deal fund­ing and struc­tur­ing.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.