Alfa Laval Open To Alliances, Buyouts

The Rs 249.5 crore Alfa Laval India may scout for acquisitions and alliances in India. "We are absolutely ready to look at growth opportunities, not only by organising ourselves in the company but also look at acquisitions and alliances. If something interesting should come up, an acquisition is not excluded," Sigge Haraldsson, president and CEO of Lund-based, Sweden, Alfa Laval Ab said in an interview here. Haraldsson is on a whistle-stop visit to India.

But Alfa Laval (India) managing director Satish Tandon cautioned that an acquisition did not lie on the Indian subsidiary's immediate horizon because most domestic engineering companies did not have world-class technology. He said that Alfa Laval (India) would more likely strike marketing alliances next year. The Pune-based engineering products company had already tied up with instrumentation (pressure and flow gauges) and boilers manufacturer Forbes Marshall. Alfa Laval sells heat exchangers to the company which then fit its own products and markets the sub-system.

 

Alfa Laval refrains from selling such products to other companies. "We have a number of pumps and valves. But it would be interesting to sell other pumps and valves in the market, without owning the company that manufactures them. What we can offer them is our sales organisation and our name," Haraldsson said.

Asked whether Alfa Laval (India) would make another open offer to its shareholders, Haraldsson said that it would not.

The 56-year-old CEO, among the most widely recognised figures in the Swedish business firmament, explained that the parent had been quite content with a 51 per cent stake in its Indian subsidiary. However, control of the privately-held Alfa Laval worldwide changed in August 2000, with the Rausling family (which owns Tetra Pak) selling a 60 per cent stake to Industri Kapital, the private equity investment firm, and retaining the remaining 40 per cent equity stake.

The Securities & Exchange Board of India regulations required Alfa Laval (India) to make an open offer, the company got an exemption from Sebi but minority shareholders insisted that the company make an open offer, which it did.

The open offer closed on August 14 and Alfa Laval AB acquired another 13.10 per cent equity, taking the parent's holding in its subsidiary to over 64 per cent. The financial institutions hold around 18 per cent, with small shareholders owning the rest.

Alfa Laval (India) has also decided against delisting from the bourses, Haraldsson said,. "The only company in the Alfa Laval group that managed to stay public through all the ownership changes was Alfa Laval (India). In 1991, when the Rausling family acquired Alfa Laval AB, it was taken off the stock exchanges. It had been listed for 90 years," he said. Alfa Laval is now poised for a share float in Sweden.

Haraldsson said he was pleased with the Indian company's performance. Alfa Laval (India) posted a turnover of Rs 249.5 crore in 2000, and a post-tax profit of almost Rs 39 crore, up 82 per cent from the previous year. The company has reserves and surplus of Rs 130. 24 crore. Further, the company has orders worth Rs 200 crore in hand. Its share price on the BSE hovers around Rs 150-154 level.

Simultaneously, Alfa Laval (India) has been on a consolidation drive. Not long ago, it sold Alfa Lavel Saunders to Crane Company of the UK. More recently, it merged Lavrids Knudsen Maskinfabrik, a subsidiary, with itself, and is merging Alfa Laval Financial Services, another subsidiary. Both will be Alfa Laval divisions. The idea here is largely, though not entirely, to save costs.