Mahindra Picks 55.2% Stake For Steering Control In Reva

Automobile major Mahindra and Mahindra (M&M) has acquired 55.2% stake in electric car manufacturer REVA electric Car Company–a joint venture between the Maini Group and California-based AEV LLC–through a combination of equity purchase from the promoters and a fresh capital infusion of Rs 45 crore ($10 million) into the company. The Bangalore-based REVA will be renamed Mahindra REVA Electric Vehicle Co Ltd. 

VCCircle first broke this story on the possible change in ownership at Reva on May 17. Pawan Goenka, president automotive sector and farm equipment sector, M&M, will be the chairman of the new company while Chetan Maini, promoter of Reva, will be its chief of technology and strategy. REVA currently sells its electric car in 24 countries and has sold about 3,500 vehicles globally till date.

The Maini Group-led company is backed by venture funds Global Environment Fund (GEF) and Draper Fisher Jurvetson (DFJ), who together hold a large minority stake, estimated at around 47%, after having invested $10 million each.  The promoters of Reva are the Maini Group, which also runs auto component businesses, and California-based AEV LLC. The new board of Mahindra Reva will have five nominees from M&M, two from Reva’s founder the Maini family and one from California-based AEV LLC, Reva’s co-founder.

Goenka said, "This is a key strategic acquisition for Mahindra in its march towards sustainable mobility. Mahindra and REVA bring together complementary strengths. With Mahindra’s vehicle engineering expertise, global distribution network, sourcing clout and financing support, REVA’s vehicles have a potential to significantly gain in market penetration." 

Chetan Maini said, "The EV market is poised to grow significantly and we conclude that in order to seize the opportunity, we needed the resources and experience of a major automotive manufacturer."

Vaishali Jajoo, Auto Analyst, Angel broking, said, ""There is tremendous growing popularity for the electronic/green technology vehicles in Europe and the US and through the Reva buyout, M&M can gain a better position abroad in electronic vehicles segment. Right now in India, there are not many electronics cars that are sold. However, 4-5 years down the line, there would be more potential in the sector in India. In that sense, in the long-run, M&M can gain an upperhand in the Indian electronic vehicle market."

Although transport sector globally has been the chief contributor to environmental pollution, the adoption of greener options by consumers has not been very proactive in terms of sales numbers. Take, for instance, this study by Deloitte Consulting, as reported by Reuters recently, which says that high cost and limited performance will keep the number of electric cars at only 2-5% of the US market a decade from now. “The auto purchase decision in the United States is very much a brand purchase. People tend to affiliate with automotive brands," said Robert Hill of Deloitte, in the report.

The firm, which was targeting a breakeven in the current fiscal, had, in a landmark deal, signed up with General Motors to electrify the entire Spark range of vehicles for the Indian market. Besides, Reva was also in advanced stages of talks with US-based Bannon Auto to manufacture Reva locally as part of its licensed manufacturing business. Reva also recently entered into an agreement with Northern Lights Energy (NLE), an Icelandic investment company, to market its products in Iceland. As part of the agreement, NLE will have an exclusive distribution right for the newly launched model of Reva car – NXR.

The company is currently in the midst of putting together its new plant, which should be operational by the end of the current fiscal, with a capacity of 30,000 vehicles at an investment of Rs 30 crore. It is also preparing to launch NXR, the family car platform, sometime this year.

The M&M scrip touched intra-day high of Rs 538 is being traded at Rs 529 around noon.

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Investor Profile: Rustic Canyon Partners

Jon Staenberg, Partner, Rustic Canyon Partners


on Staenberg has worked with venture-backed technology companies for 20 years in several capacities: a founder, manager, and venture capitalist. As an entrepreneur he has established two companies, served on the senior management team of several early stage organizations, and provided venture capital funding to more than 100 start-ups. He is one of the most experienced venture capitalists in the Pacific Northwest, having raised three funds totaling over $300 million.

Early in his career, Jon established several marketing groups at Microsoft where he worked from 1988 through 1994. He then joined the senior management team of Virtual i-O, a venture-backed startup, as VP of Sales & Marketing. Pursuing his passion for helping to establish and grow great companies, he has spent the last ten years raising and deploying venture capital with a focus on Silicon Valley and Seattle-based startups. In 2004, Jon joined Rustic Canyon Partners, heading up their Seattle office.

Jon currently is a director on the boards of ePartners and Limelife, and serves on the advisory boards of New Vine Logistics, Vista Broadband, Prime Advantage, Efficient Frontier, and uReach.com.

He graduated Phi Beta Kappa from Stanford University, where he received his BS, MA, and MBA.

Rustic Canyon Partners

With over $800 million under management, Rustic Canyon Partners invests in venture capital stage and middle-market companies positioned for strong growth. We typically invest in private, growth stage companies that capitalize on opportunities created by technology change, market evolution, regulatory shifts or other factors. To date, we have invested in a broad array of technology-driven and middle-market companies in sectors such as communications, software, IT infrastructure, digital media, business and information services, materials science and efficient energy.



We invest across the equity continuum, from seed stage companies to leveraged buyouts. Our venture capital investments typically range from $2-4 million initial investment, while our investments in more mature businesses are significantly higher. We are long term investors and reserve substantial capital to support our portfolio companies through multiple rounds of financing. We prefer to take lead positions in the investments we make, though this is not a requisite. We are hands-on investors seeking to add significant value to our portfolio companies; therefore we generally require board representation and have a preference for West Coast-based companies given the footprint of our operations.

Some Previous Investments:

CarsDirect

CarsDirect is the leading multi-brand online car buying service, providing new and used automobiles and related products and services, such as loan and lease financing and in-demand aftermarket products including extended warranties. CarsDirect is the first online automotive marketplace to offer visitors the choice of three distinctive car buying options: buying a new car online through the company’s award-winning direct channel; being matched with a top-quality new car dealer of their choice via the CarsDirect Connect channel; or locating and purchasing a used vehicle through the CarsDirect Used channel.

Glass, Lewis & Co.

Glass, Lewis & Co. uses proprietary research and extensive analysis to objectively evaluate the corporate integrity and financial transparency of public companies and advise shareholders on the exercise of their voting rights. The firm was formed in 2003 by corporate finance, accounting, legal, financial analysis and public policy professionals, and boasts a client list that includes a substantial number of large institutional investors and pension funds.

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ACK Media Acquires India Book House

ACK Media, which owns the Amar Chitra Katha brand, has acquired India Book House (IBH) to emerge as one of the largest integrated publishing and distribution firms in India. This buyout will help ACK Media to bring more content, better distribution and delivery capabilities for family entertainment.

ACK Media is also looking to raise nearly Rs100 crore in the next 18 months to expand its portfolio of products and promote itself in India and abroad.

IBH was established in 1952 for the import and distribution of books and magazines. It has one of India’s widest distribution networks with 10 branches across the country. ACK Media plans to grow the business by creating more children’s content in English and regional languages to leverage the IBH pipeline, acquiring new publishing partners, adding new products categories (e.g., merchandise, home video), deepening the network in 50+ cities, and entering the direct-to-consumer market in a big way.

Samir Patil, CEO and Founder, ACK Media, said, “This acquisition is essential for our overall strategy of expanding the children’s media category to all forms – print, video, games, toys, merchandise, and other products. We are keen to have a direct relationship with the end customer and this is one step forward.”

Ashish Goel, Chief Operating and Financial Officer, ACK Media, will be the Managing Director of the new entity. He said, "The reality of the market place is that while media consumption is increasing, there are very few ways to effectively reach a paying audience. This is true not just in the Tier 2, 3 towns but also in the metros. We will invest aggressively in the business to fill this gap by creating an IT-enabled, customer-centric distributor that can reach an unmatched number of cities and vendors in India.”

“The new entity would have a robust infrastructure of 10 offices in major metro cities across India, a distribution network that includes over 2,500 stores and over 22,000 vendors, thus allowing us to penetrate not just the top 12 cities, but the top 400 cities in India in a very meaningful manner,” he further added.

“With an additional investment of Rs 90-100 crore, our objective is to take this figure, over the next three-four years, to the Rs 500-crore mark,” said Samir Patil.

He further added that the money will be pumped into four main growth areas. The first of these will be expanding the reach of the firm’s content and products. ACK Media will also look to expand its portfolio of characters and brands, both organically and through acquisitions. “We are hoping to generate Rs125 crore in revenue in 2010-2011”, said Mr. Goel.

Some of its popular brands including Amar Chitra Katha, Tinkle, Karadi Tales and well-known proprietary characters like Suppandi are part of ACK Media. The company develops products for multiple platforms including print, home video, broadcast television, films, mobile and online services. ACK Media is headquartered in Mumbai, has a design studio in Bengaluru and a subsidiary in Chennai.

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Hindustan Sanitaryware Eyes Brand Buyouts In Italy

Hindustan Sanitaryware & Industries Limited (HSIL), known by its Hindware sanitaryware brand, is eyeing buyouts in Europe as part of its global expansion plans. It is learnt that the Somany Group-owned company is planning brand buyouts in Italy, regarded as a country renowned for its sanitaryware brands. HSIL has a 40% market share of the Indian sanitaryware market.

Anil Chandani, VP, Corporate Finance, HSIL, told VCCircle, “We are keen on brand buyouts in European countries. Brand buyouts is a viable model compared to acquiring the entire company as manufacturing abroad is not cost-effective. As far as brands are concerned, Italian brands are the most popular across the globe.” However, he refused to disclose more details on their plans. Fund-raising will not be a concern for the company as it has already received approval from shareholders to raise up to Rs 150 crore through various private placements.

According to a report by The Centre for the Promotion of Imports from developing countries, a European agency, Italy is the largest market in the EU for sanitaryware and ceramic tiles. In 2008, it amounted to €3.6 billion, after a growth of 4.6% per year since 2004.

In March, the Rs 836-crore HSIL Ltd acquired the business of manufacturing and dealing in chrome plated brass bathroom fittings and accessories under the brand ‘Crabtree’ from Havells India Ltd.  HSIL entered into a strategic alliance with $1.5- billion Sanitec Group of Finland to exclusively market their flagship brand Keramag in India. HSIL Limited has also tied up with TEUCO, the largest Italian designer brand, to launch premium bathtubs & multi-functions in India.

According to the report, Italy counted 43 ceramic sanitaryware producers in 2008, including 37 in the Civita Castellana district (province of Viterbo), the most important manufacturing cluster for this sector in Italy. Activities took place in 53 factories, of which 42 are located in the province of Viterbo. Major Italian producers of sanitary ware include Ceramica Althea, Ceramica Esedra, Ceramica Galassia, Hidra Ceramica, Marazzi Group, Novellini, Pozzi Ginori and Varm.

Last year, PTI, quoting Sandip Somany, joint managing director, HSIL, had reported that the company was in talks with 4-5 European companies for acquisition for a deal worth Euro 30-100 million.

The company was established in 1960 in a joint venture with Twyfords, UK.  The company changed its name to Hindustan Sanitaryware & Industries Limited in 1969. HSIL has about 1,200 distributors and 12,000 plus retailers across India. 

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Godrej Consumer Buys Latin America’s Issue Group

Announcing its fourth acquisition in the last three months, Godrej Consumer Products Ltd (GCPL) has further expanded its presence in the emerging markets with acquisition of South America based Issue Group. The deal gives Adi Godrej-led fast moving consumer goods firm, which has already announced buyouts in Asia and Africa in past months, a platform to expand its operations in Latin America.

Issue Group is a leader in Argentina’s hair colour market with an over 20% market share. The market for hair colour in Argentina, which is pegged at $200 million, is growing at a CAGR of 22% annually, according to a release. The firm is also a top player in markets like Paraguay, Peru and Uruguay with a presence in Brazil. Issue Group had revenues of $33 million in 2009. The acquisition involves buying of a 100% stake in  Laboratoria Ceuna, Consell SA, Issue Uruguay and Issue Brazil. Though the deal size was not disclosed, Issue Group has been valued at 8 times EBITDA and is expected to be EPS accretive from the first year of operations.

London-based investment bank Elara Capital advised GCPL on the deal.

The deal is part of GCPL’s global 3 by 3 strategy, which involves a presence in Asia, Africa and Latin America in the three core categories of homecare, personal wash and haircare. Executing this strategy, it has acquired Tura in Nigeria and PT Megasari Makmur in Indonesia in recent months. It also consolidated its domestic operations with the buy out of Sara Lee in their joint venture Godrej Sara Lee – which markets Good Knight, Hit and Jet brands – for $234 million earlier this month.

VCCircle earlier reported that GCPL is also holding talks with private equity majors such as Carlyle, Standard Chartered Private Equity and ChrysCapital for raising around $130-$140 million as part of its overall capital-raising plans estimated at over $650 million to fund these acquisitions.

In FY10, GCPL reported consolidated revenue of Rs 2,042 crore (up 47%) with net profit of Rs 340 crore (up 97%). The company’s key businesses are spread across the personal care segments of soaps, hair colours, toiletries and liquid detergents, with most of them operating at margins of over 20%.

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