Mitsubishi ups stake in TVS Auto Solns to 25%

Diversified global giant Mitsubishi Corporation has became a substantial minority stakeholder in TVS Automobile Solutions Private Limited (TASL), one of India’s leading independent aftermarket solutions provider and part of the $8.5-billion TVS group.

The Japanese conglomerate, which was holding a meagre 3% stake in the TVS group company last year, has increased it to 25% by picking up an additional 22% now. The consideration for its entire 25% stake in TASL is pegged at little over `250 crore, according to R Dinesh, director, TVS Automobile Solutions.

By increasing its stake, the Japanese giant will play a more active role in the company’s management. It plans to help grow TASL’s lineup of competitively priced automobile parts by connecting it with Japanese suppliers, while at the same time leveraging its own overseas network to develop TVS group company’s business model outside India. These efforts should contribute to mutually sustainable business growth.

As per the agreement, subject to approval by the Competition Commission of India (CCI) & other relevant authorities, Mitsubishi will increase its stake from 3% to 25% in TASL through a combination of primary investment and secondary purchase. Existing Gulf-based private equity player Kitara Capital, which had invested in TASL a few years ago, will partly exit the company while other promoters (all TVS group companaies) will sell some of their stakes to Mitsubishi, Dinesh pointed out.

TASL is a profitable company with an annual turnover of `1,300 crore last fiscal, including `400 crore from overseas markets. “With this strategic partnership with Mitsubishi, the company will grow 35% in this fiscal and its revenue will touch `1,800 crore by March 2020,” Dinesh said, adding “we are in the next phase of strong growth journey through this tie-up”.

Mitsubishi will strive to expand TASL’s business and participate in the growing Indian market through introduction of Japanese automotive parts suppliers, and enhancement of price competitive parts line-ups for TASL. In addition, as a collaboration synergy with TASL, Mitsubishi aims to deploy TASL’s successful business model in overseas markets and contribute to TASL’s continuous business expansion.

According to Dinesh, “Our core focus, apart from domestic market, will be on African and West Asian regions where the demand for such aftermarket services is huge. We seek to replicate our success in the domestic market abroad. With this tie-up, we hope to enter other markets too going forward in a more scalable manner.”

S Wakabayashi, senior vice-president, Mitsubishi, said, “This is an important partnership between two great organisations. Indian automotive aftermarket has grown in double digits consistently for many years now and is expected to grow constantly in the future. With TASL’s business know-how and Mitsubishi’s global expertise, we will mutually have a win-win partnership.”

G Srinivasa Raghavan, executive director, TASL, said, “The independent Indian after market is estimated to be around $8 billion and is growing at 15% annually. More than 70% of this market is unorganised and we see huge opportunity to make it more organised. With this tie up, more and more garage, parts distributors, retailers will become part of the mainstream to be competitive in a changing technological evolution apart from creating more entrepreneurs in India.”