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Deal counter: Tata Technologies likely to announce a big-ticket acquisition in April

Tata Group’s Singapore-headquartered engineering services unit Tata Technologies is scouting for acquisitions and is discussions with a few players in the space in India and other emerging markets.

Tata Technologies is keen on buying out a few captive engineering centres, besides making significant additions to its headcount, Chief Executive and Managing Director Warren Harris told Chillicious in an exclusive interview. An announcement in this regard may come in as early as April.

“We are in discussions with a number of companies about the potential of taking some of captive centres and selling them to us. These could be in India or other emerging markets. We expect to make an announcement on an acquisition within the next month,” said Harris.

TTL specialises in providing engineering services outsourcing, product development IT services solutions for product lifecycle management, and enterprise resource management, to automotive, aerospace and consumer durables manufacturers and their suppliers.

TTL’s services also include product design, analysis and production engineering, knowledge-based engineering and customer relationship management systems.

Expanding Clientele

Tata Motors, India’s second-largest automotive company in terms of market cap, holds little over 72 percent in Tata Technologies (TTL). While the company’s engineering services division bags a significant amount of projects from Tata Motors, it wants to rope in other carmakers to expand its clientele. Crucial to this expansion are captive engineering centres.

“Many of our customers have concluded (that) they are not very good at running captive (engineering) centres in low-cost countries. They are good at producing vehicles, aircrafts and industrial machines, but running an engineering centre is not their core competence,” said Harris.

TTL achieved a milestone in FY16 when it clocked Rs 1,082 crore in turnover, registering a 10 percent on-year profit growth at Rs 223 crore. In fact, TTL is one of the few profit-making subsidiaries of Tata Motors.

Harris said he expects the demand shown from automotive technology trends will help the company find clientele in India and abroad.

Headcount Addition

Further, TTL wants to ramp up its 9,000-member strong headcount by 15-20 percent annually for the next 3-5 years. It has development centres in India, Thailand, Canada, US, Mexico and Europe.

“We have the capabilities, but we don’t have the critical mass that we are going to need on the mechanical side,” said Harris referring to the areas TTL is focusing on such as mechanical systems, body structure, interiors and chassis systems.

No Divestment Plans

Harris ruled out reports which indicated that TTL was looking to divest stake for raising funds. “The company does not need funds, it has a very strong balance sheet. We have a lot of cash on our balance sheet. In this point in time the company is not looking to raise funds,” he said.

Last month Bloomberg had reported that PE giant Warburg Pincus was in discussions with TTL to buy a ‘significant minority stake’ in TTL.