Companies
Carlyle looks to build $400 million vehicle for auto parts deal in India
Summary
Since Carlyle has not found suitable large-sized businesses, it will buy smaller businesses to be integrated later, in so-called roll-up mergers. Rival Blackstone has followed a similar model with Sona Comstar.Global private equity firm Carlyle is building a $400 million platform in India to acquire and merge auto component makers, two people aware of the plans said.
Carlyle may acquire at least two parts-makers by the end of this financial year and two more in the next 12-18 months, the people cited above said on the condition of anonymity, adding it will focus on companies catering to electric vehicles, as well as export-led companies.
Auto parts focus
“The firm is looking to build a business with a focus on auto components, especially in the precision machining and forging components in EVs," one of the two people cited above said. “It will look to acquire mid-size companies and integrate them," he added. Apart from EVs and exports, Carlyle will also make smaller investments in component makers for commercial vehicles.
The PE firm will look to secure controlling stakes in its investments, the people cited above said. Carlyle did not respond to a request for comment on Sunday.
Since Carlyle has not found suitable large-sized businesses, it will buy smaller businesses to be integrated later, the people cited above said, in so-called roll-up mergers.
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In August, Carlyle acquired Worldpac, a leading automotive aftermarket parts provider in North America from Advance Auto Parts in a $1.5 billion deal.
“It is a thesis that they strongly believe in and are looking to replicate in other markets. Besides being a huge domestic consumption play, India can grow as an export hub, especially in the auto component segment and hence, this seems a lucrative opportunity," the second person added.
Competitors's success
Other PE firms have seen success with auto components investments as well.
Carlyle’s India head Amit Jain, in his previous role as a Blackstone managing director, had led the investment in Sona Comstar, an auto component business supplying to EV manufacturers. Blackstone had created Sona Comstar through the 100% acquisition of Chennai-based Comstar for about ₹1,000 crore, which was then merged with Sona BLW. When Blackstone exited Sona Comstar, it had made nearly 12 times multiple of its initial capital.
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Rival Bain Capital is also in the process of creating an auto components platform. On 17 September, the PE firm said it was investing in RSB Transmissions, which makes automotive, construction, and off-highway equipment systems and aggregates. Bain said it would provide the capital to pursue strategic M&A opportunities towards building a diversified platform through RSB. “We are collaborating closely with the Behera family (the founders of RSB) and are committed to building a larger, more diversified platform," Rishi Mandawat, partner at Bain Capital, said last week.
Second Indian platform
This would be Carlyle Group’s second platform in India after it set up one in the generic pharmaceuticals segment after partnering Viyash Life Sciences in 2021. Through the platform, it acquired Symed Labs, a manufacturer of niche APIs to enable backward integration.
Carlyle is likely to invest out of its new sixth Asia buyout fund for which it has so far received commitments up to $3 billion for the total fund of $8.5 billion it is looking to raise. On 13 August, Bloomberg reported that the fund has raised a Japan focused fund from investors to invest in high growth opportunities.
