IFC infuses $7.7 m into auto firm

Auto components and sub-assembly manufacturer RSB Group announced on Wednesday that it received investments worth $7.7 million (approximately Rs 34 crore) from the International Finance Corporation (IFC) - the private banking arm of the World Bank.

The group, which is expanding its manufacturing activities and setting up new manufacturing facilities in India is looking at inorganic expansion as well via the overseas acquisition route.

RK Behera, group chairman, IFC said that it was investing in two group companies, International Auto and RSB Transmission via preference shares.

Without commenting on the valuation behind the stake sale to IFC, Behera said the investment will translate into 9.5 per cent equity stake when the group goes public, adding, "This will happen in a little over a year from now," Behera said.

The Rs 450 crore group, which manufacturers engine components and transmission components for auto giants in India as well as for overseas clients, has manufacturing facilities in Jamshedpur in Jharkhand and Pune in Maharashtra.

It supplies components and aggregates to manufacturers of automobile engines, commercial vehicles and construction equipment.

Behera said the group is setting up greenfield manufacturing facilities in Uttaranchal, Chennai and Pune, in addition to doubling up capacities of its plants in Jamshedpur and Pune.

"The group has drawn out an elaborate plan for expansion, which will be completed by next year. It will see an investment of about Rs 100 crore this year and another Rs 60 crore next year," Behera said, adding that the investments will come from internal accruals and institutional financing.

The group is in talks with US firm Team Industries to form a joint venture for making transmission axles.

"This will be a Rs 40-crore initial investment at Sanas Wadi or Ranjangaon near Pune, where RSB Group will be a majority stakeholder," Behera said.

The company is also in talks with a trailer axles manufacturer in the European Union and also with an east Asian company, Behra informed without disclosing the identities of the prospective partners.

Behera said, the group will also acquire units in the US to make their presence in felt there. "We will look for units in similar space as we have a good customer base."

Currently, about 12 per cent of the group's turnover comes from exports, which is projected to reach 30 per cent in two years time when capacity expansion will be completed.

As per projections for the next two years, the group turnover will rise to Rs 650 crore in 2006-07, from the present Rs 450 crore and will cross Rs 1,000 crore in 2007-08.

"This will be possible with completion of expansion, new plants and acquisitions," Behera said.