Brick & MTAR
E. Kumar Sharma November 27, 2007
CIRCA 1970. Three professionals, with a seed capital of Rs 3 lakh, set up a precision engineering company.
Government entities are its customers. Today, valued at Rs 1,000 crore, this Hyderabad-based company, MTAR Technologies, makes precision machined parts for nuclear power reactors, and engine & structural components for aerospace and defense applications.
It’s also begun to attract global attention. Sensing the opportunity and promise for this niche player, US private-equity giant, The Blackstone Group, has now chosen to partner with it and invest $65 million (about Rs 260 crore) for a 26 per cent stake in the company.
“We need this for our growth plans. Not only will it help us scale up our operations in terms of management expertise, global best practices and technology, the partnership will also give us access to Blackstone’s global network,” says P. Ravindra Reddy, chairman, MTAR.
The privately-held company, which hopes to triple its revenues of around Rs 100 crore (for 2006-07) by 2010, is now sensing new opportunities emerging with the entry of MNCs and big players into the aviation and oilfields businesses (the company now has plans to enter the oil fields equipment sector, too).
Currently, around 65 per cent of MTAR’s revenues come from nuclear projects, about 25 per cent from space and the remaining 10 per cent from defence. Its major customers include the Nuclear Power Corporation of India, the Indian Space Research Organisation (ISRO), Hindustan Aeronautics Ltd (HAL), ONGC and BARC.
Just about 2 per cent of its revenues come from the private sector. But that will change in the years ahead, as the private sector increasingly forays into fields like aviation, oil fields and also nuclear energy (provided of course the Indo-US nuclear deal goes through). MTAR hopes to get between 50 and 60 per cent of its revenues from the export market in about five years from now.
Consider a sample of its capabilities today: It is one of the two private sector companies involved in the manufacture of cryogenic engines for the Indian space programme (the other being Godrej). It is also involved in the Light Combat Aircraft (LCA) project being undertaken by the Indian defence establishment.
In a release put out after the deal, Akhil Gupta, Chairman of Blackstone Advisors India, said: “MTAR is a sector leader with very unique skill-sets, capabilities and in-depth understanding of a very niche and high potential industry.
We are very enthusiastic about this investment as we foresee a huge growth opportunity for MTAR both in domestic and global markets.” He has reasons to be upbeat, having got three representatives on MTAR’s 12-member board; he is more than just an investor and can play an active part in the team that will continue to be led by the three professionals, who started it all: P. Ravindra Reddy, Satyanarayana Reddy and P. Jayaprakash Reddy.