Indian firms are increasingly warming up to the idea of tapping global private equity (PE) funds.
Going beyond just raising capital, they are increasingly utilising the PE firm to develop a global edge, to gain inroads into international markets and develop strategic tie-ups with foreign partners.
Noida-based Phoenix Lamps Ltd, in which UK-based Actis bought a controlling stake last year, is cashing in on a slew of global tie-ups with international lighting firms, aggressive forays into international markets including Europe and West Asia, and rapid ramping up of capacity.
Aurangabad-based Endurance Technologies, in which Standard Chartered Private Equity Fund picked up stake a couple of years ago, has been on a roll since, acquiring three European firms and opening a Detroit office.
Gokaldas Exports, India’s largest garment exporter, decided to sell out to Blackstone Group for $165 million in August last year to leverage Blackstone’s financial muscle and contacts in the key US market.
Tech access
“Actis’ contribution has been throughout the entire value chain — bringing forward suppliers to lower production costs and for quicker scale-up, besides providing numerous customer introductions in India and overseas… Access to new technology partners have helped us develop into a complete lighting solutions company from just CFL manufacturer earlier,” Mr Rajiv Prasad, Managing Director, Phoenix Lamps, told Business Line.
Following Actis’ buyout, Phoenix Lamps has tied up with two high-end Italian luminaire companies — the Voghera-based Zonca and the Milan-based Grechi Illuminazione. It has also entered into a marketing pact with China’s NVC to sell speciality lamps, besides plans to form a joint venture in Kuwait for manufacture and marketing of CFL lamps and luminaires.
Learning global ways
“While a majority of mid-cap firms still prefer to raise capital through bank loans or stock exchanges, since some family-run companies fear outside intervention in management, the trend is changing. Promoters are increasingly looking at PE investments as a chance to learn the ways of global business and enter new markets and businesses internationally,” an executive with a PE firm said.
The biggest input is in the form of superior management skills, including perceived skills at cost cutting, improved supply-chain logistics and the ability to find clients using global networks.
Endurance Technologies, which had raised $33 million from the private equity arm of Standard Chartered in 2006, subsequently went on to acquire three European die-casting firms — Nuova Renopress and Fondalmec S.p.A (both in Italy) and Amann Druckguss in Germany. The company has also started a marketing office at Detroit.
When Gokaldas Exports sold out to Blackstone, a key reason cited was that with over 55 per cent of the company’s business coming from the US, the firm could leverage on Blackstone’s financial muscle and contacts there.
According to sources, Blackstone has begun adding managerial staff, bringing in global best practices such as Six Sigma and beefing up the company’s marketing operations in the US. Gokaldas is also talking acquisitions in India and South Asia to achieve economies of scale.
Source: Business Line