Varroc to continue focus on growing core business post IPO

Mumbai: Auto components maker Varroc Engineering Ltd, which is in the process of launching its initial public offering (IPO), will focus on expanding its two largest verticals—exterior lighting systems for passenger cars and two-wheeler components—after it goes public, managing director Tarang Jain said.

In an interview, Jain said while the Aurangabad-based firm will focus on the global passenger car market for its lighting unit, it would lay greater emphasis on the Indian and South-East Asian two-wheeler markets.

“Our focus will be on how to grow these two colivemintre businesses, which form close to 95% of our total business. In lighting, we are No. 6 globally and want to break into the top three, while for the two-wheeler business, we want to grow further in India and also tap South-East Asia because they are the biggest markets (for two-wheelers) in the world”, Jain said.

While the firm’s global lighting business accounts for more than 60% of revenue, the two-wheelers business almost makes up the rest, according to Jain.

Jain founded Varroc in 1990 to supply plastic mouldings to Bajaj Auto Ltd for the popular Chetak scooter.

Since then, the firm has ventured into manufacturing polymers, electrical and electronic parts, precision metallic components, undercarriage forged machine components and drill bits for the oil and gas sector.

In July 2012, Varroc moved into the exterior lighting segment with the acquisition of a unit from the US’s Visteon Corp. for $92 million. The acquisition made Varroc one of the largest suppliers in the segment. Varroc filed its preliminary papers with the Securities and Exchange Board of India (Sebi) on 29 March to float an IPO. Jain hopes to receive approval by the end of the month and is looking at a potential listing in June.

The firm plans to expand its lighting business by tapping into new markets such as South America, Japan, South Korea and Morocco, from where it plans to cater to various French original equipment manufacturers (OEM), in addition to the Spanish market.

“We are also looking at further acquisitions in this space,” Jain added. To be sure, the firm also aims to increase its market share in the segment in India, which at present stands at 8%.

Varroc already supplies lighting systems to large global OEMs such as Renault SA, Nissan Motor Co., the Volkswagen Group, Ford Motor Co. and Jaguar Land Rover Automotive Plc. “Still, we are only No.6 with a 4% market share of the global lighting business with a billion dollars in sales. The No.5 player is double our size. So we have a long way (to go). Even to be a number three player, we would need to have $83 billion in sales,” Jain said.livemint