The Rs325,334 crore Tata Group’s auto component maker — Tata AutoComp Systems Ltd or Taco — plans to raise Rs750 crore through an initial public offering.
It will be the first offering from the venerated empire since Tata Consultancy Services, India’s largest information technology company, floated one in July 2004.
Taco filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) on December 31, 2010.
The issue will also include the sale of up to 3.56 crore shares by its shareholders, including Tata Motors, Tata Industries, Tata Sons and Tata Capital.
The proposed fund raising will include an offer for sale by existing shareholders and a fresh issue of shares.
Taco will become the first firm incubated by Tata Industries Ltd, to be primed for a listing.
Tata Industries Ltd, the holding firm in the Tata Group with a specific agenda to spawn new businesses, holds 34.40% of Taco, which, in turn, operates as a holding firm for nine auto component businesses.
Tata Motors is the second-largest shareholder with a 26% stake, while Tata Capital and Tata Sons have 24% and 14.25%, respectively.
Taco, under a new leadership comprising R Gopalakrishnan, chairman, and R S Thakur, managing director and CEO, turned around when it reported a Rs41.77 crore net profit for the year ended March 31, 2010.
For the half year ended September 30, 2010, profit stood at Rs35.62 crore. The company had reported a loss of`192.46 crore in 2008-09.
The auto component industry is growing at a fast pace, leading to more investments in capacity expansions.
According to Crisil, the credit rating agency, domestic production of automotive components recorded a compounded annual growth rate of approximately 16% from fiscal year 2005 to 2010.
The growth of the Indian automotive components industry has largely been because of India’s inherent cost advantage, healthy domestic demand and availability of a skilled labour force.
As per the prospectus, Taco plans to expand capacities of its interiors and plastic division, which makes moulded parts such as interiors for passenger vehicles.
The division has ten manufacturing plants located at Hinjewadi (Pune), Chinchwad (Pune), Maan (Pune), Bhosari (Pune), Talegaon, Nashik, Bengaluru, Halol, Sanand and Ranjangaon.
The company proposes to undertake a capacity expansion and modernisation program at its existing facilities at Maan, Pune and Bengaluru, and plans to set up a manufacturing facility at Pantnagar, Uttarakhand.
Further, it plans to invest in capital equipment to augment its current production capacity in order to meet current requirement of business.
The company has also proposed to set up additional factory buildings at Pune, Jamshedpur, and Pantnagar for its subsidiary - Taco Composites Ltd. Taco Composites manufactures sheet moulded composites for spoilers, panels and hoods for both passenger and commercial vehicles.
Incorporated in 1995, Tata Autocomp has three subsidiaries and is part of five joint ventures.
The company is one of the leading manufacturers of automotive components including vehicle interiors, exteriors, engine cooling systems, seating systems, wiring harnesses, batteries, sheet metal parts, mirrors and control cables.
Tata Motors is the company’s largest customer accounting for approximately 48% of the company’s total income.
Some of the other customers include Fiat, Toyota Kirloskar Motor, General Motors, Mahindra & Mahindra, Ashok Leyland and others.