Automobile industry opting for inorganic route to support growth cycles: Report

Automobile industry in India is opting for inorganic route to balance investments to support current growth cycles and prepare for future global disruptions, says a report.Deal volumes in the domestic auto space have remained steady with 18 transactions in year-to-date (YTD) 2018 worth USD 500 million, according to the Grant Thornton ACMA report — ‘M&A in auto: Shifting gears to be future ready’.While average disclosed deal size is USD 45 million, these deal volumes have been boosted by large buy-out transactions by financial investors and overseas acquisitions by large incumbents in the Indian auto sector, it added.Deal volumes pertaining to mid-market players have been limited, but there is an increasing focus on exploring inorganic opportunities amongst this segment on the back of increasing cash reserves and reasonable valuations in the overseas markets, the report said.”While strategic investors continue to be the primary drivers for deals in the industry, similar to develop markets globally, a maturing industry landscape with the emergence of several scaled up players is also providing buy-out opportunities for large financial investors to participate in the growth story of the sector,” Grant Thornton India LLP CEO Vishesh C Chandiok said.All mid to large Indian auto companies ought to have an active inorganic growth strategy, including a plan to partner with such companies in and outside of India if the industry is to achieve the AMP target of USD 200 billion by 2026, he added.In addition to the traditional considerations, the report also highlighted that the inorganic route is expected to gain popularity in Indian auto sector because of continuous disruptions in the sector in the form of evolving customer preferences and increasing regulatory push on emission control and Electric Vehicle (EV) adoption.In addition to the domestic factors, the need to stay relevant from a global context is expected to be another key driver for Indian auto players to invest in and accelerate technology adoption in their own businesses, it added.

Read more: economictimes.indiatimes.com

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