The Rajan Raheja-controlled Exide Industries, the country's largest automotive battery manufacturer, is exploring the acquisition route for stepping up production capacities. The move marks a sharp departure in the Exide philosophy, which had over the years favoured growth through greenfield ventures.
The company is currently in talks with the K K Bajoria group for taking over the ailing battery division of its flagship company, Willard India Ltd. The acquisition of the Bulandshahr-based battery outfit will provide Exide exclusive rights to manufacture and sell the international Pacesetter brand, besides offering better access in penetrating the North Indian markets.
Willard's battery division has a capacity of around 3 lakh units per annum and manufactures the popular Pacesetter and GS brands of automotive batteries.
The Pacesetter brand is developed in India in technical collaboration with international automotive batteries major Japan Storage Battery Company, which also has an equity stake in the K K Bajoria venture. The unit also manufactures stationary batteries and train lighting cells.
Price Waterhouse Associates, appointed by Exide Industries, has valued the Bajoria-owned battery unit at Rs 12 crore.
According to a source, the company is likely to scrap its plans for building a greenfield project in Haryana, if the deal finally comes through.
"Setting up a new facility involves a long gestation period and the acquisition route will help the company to step up its capacity right away. Besides, acquiring Willard's Bulandshahr unit will provide the company with multi-locational advantages," the source said. The acquisition route is also being advocated since capacity enhancements at existing facilities disturb the production schedule at the units.
Exide at present has a total production capacity of 2.8 million batteries at its Haldia and Shyamnagar facilities. The company has also completed a one million unit capacity plant at Hosur for manufacturing industrial batteries. Exide's strategy is to have an overall 5 million unit capacity by the turn of the century, a target devised to make it the largest automotive battery manufacturer in Asia.
However, K K Bajoria is not happy about the Price Waterhouse valuation and has pitched for a higher price. The loan liability of the unit is close to Rs 25 crore, and the Bajorias do not wish to make a distress sale at around Rs 12 crore.
A source pointed out that the Exide management is unhappy that the Bulandshahr facility is overstaffed employing over 550 people.
"Although the employee-output norms in the industry stand at 150-175 people for a one million unit project, the Willard unit employs a massive 550 number of workers for a three lakh unit project," a source said. Exide's new one million unit capacity project at Hosur has an employee strength of only 150.
According to a company source, if the Exide management finally buys out the Willard division, it will also have to fork out another Rs 50 crore for capacity enhancement to achieve economies of scale.
However, the Exide interest in acquiring the Bulandshahr unit revolves around the massive land property adjacent to the unit. "The surplus land can later be profitably deployed for taking up vertical integration projects," a source added.
The Raheja group company has plans to go in for vertical integration projects in a big way at a later stage. It is actively considering setting up facilities for lead smelting, separators and plastic components adjacent to its manufacturing projects.
