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December 17, 2006

The new Indian MNC

Catalyzed by the wave of acquistions, Business Today has a Cover Story on "India Inc.'s new Indian MNCs". The article includes a profile of Spentex Industries which has grown rapidly through the inorganic route.
Three years ago, its promoters weren't even in the textiles business, running a profitable trading house called CLC Global. Today, Spentex Industries has a total manufacturing capacity of nearly 570,000 spindles in India and Uzbekistan, edging out erstwhile leaders Mahavir Spinning (550,000 spindles). Nearly 85 per cent of that capacity, or 484,000 spindles, has been added via six acquisitions in the past three years. And roughly 40 per cent is accounted for by one overseas buyout, in Uzbekistan, of 220,000 spindles (plus 236 airjet looms). Mukund Choudhary, Managing Director, Spentex Industries, who is credited with much of this creation, shares his rationale for inorganic growth: "Nine out of 10 people who set up greenfield projects fail." More importantly, it's cost-effective too. For instance, Spentex bought the Uzbek facilities with an investment of just 40 per cent of what it would cost to build similar capacities.

...And backing the aggression is financial savvy too. The company has managed to do nearly every kind of financial deal in the last few years, ranging from a buyback to open offers to private equity. Citigroup Venture capital invested $15 million for the Uzbek deal. In August, Spentex also became the first company to raise funds (Rs 46.60 crore) via the newly opened qualified insitiutional placement window from Sundaram Mutual Fund, Goldman Sachs, Voyager Fund and Nikko Asset Management.

Arun Natarajan is the Founder of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.