JBM aiming to buy out European ancillary company for Rs 300 cr

The New Delhi-based diversified JBM group, which manufactures components for the automobile sector, is looking to foray into the aviation space with an acquisition of a European parts making company for Rs 200-300 crore.

The group’s senior management is currently holding talks with at least 3-4 target companies based in Europe, which cater to clients like EADS, Boeing and Bombardier, among others.

JBM is one of the few domestic auto parts-making companies which had outlined plans recently to enter the aviation space. Some other Indian companies that have similar plans include Bharat Forge, Maini Precision Products, Lumax, Minda NTS, Sundaram Fasteners and MRF Tyres.

JBM Group’s Executive Director Nishant Arya said: “We are talking to a few Tier-I parts making companies that supply to aircraft manufacturing firms. We are considering buy-outs or an alliance with the target company.” The Rs 2,700-crore JBM Group has over 28 plants at 11 locations under its fold. It has 14 companies which supply to manufacturers like Maruti, Tata Motors, Bajaj, General Motors, Volvo and Ford, among some others.

The group is looking to take advantage of the lower valuation of the many mid-sized European companies, which are looking for fresh equity support from a foreign organisation through a stake sale or through joint ventures.

Indian companies foraying into the aviation sector either have very little or no exposure on making of aircraft parts and are doing so only to gain access to the complex manufacturing processes and design technology employed in the sector. “We can have the technology through an acquisition or by a technical licensing alliance with the company. The acquisition should be over before the end of the financial year,” added Arya.

Indian auto parts supplying companies have only recently warmed up to the idea of making an entry into the aviation industry, while their counterparts in western countries — including ThyssenKrupp and GKN Aerospace — have already forayed into the sector.

The ongoing slump in the auto sector, which started at the beginning of the third quarter in the last financial year, had forced auto component makers to cut production by half and even shut manufacturing facilities to match decreasing demand from original equipment manufacturers (OEMs).

Analysts feel many component companies in India, which have been catering to the auto sector firms as their core beat are now shifting focus to other sectors — like aviation, energy (wind mills), oil & gas, railways and marine — to reduce their dependence on the volatile sector.

“With premier aircraft manufacturing companies like Airbus, Boeing, Hawker Beechcraft and Embraer eyeing India as a major maintenance, repair and overhaul (MRO) centre, Indian auto parts making companies will tap the aviation sector in a big way,” said a city-based auto analyst.

Margins in the aviation industry are also far higher than those in the auto component industry, which survives on margins of 10-12 per cent, analysts said.