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Avantha hungry for a pie in services

The services sector might well turn out to be the major growth area for the $4 billion (Rs18,400 crore) Avantha Group as the paper-to-power conglomerate fashioned from the erstwhile Thapar Group aims to more than double its revenues in the next three years reports Gaurav Choudhury.

business Updated: Jan 17, 2010 22:22 IST
Gaurav Choudhury

The services sector might well turn out to be the major growth area for the $4 billion (Rs18,400 crore) Avantha Group as the paper-to-power conglomerate fashioned from the erstwhile Thapar Group aims to more than double its revenues in the next three years.

“I am very keen to add at least one successful service in our business. What the specific service would be, I do not know at this point in time,” Avantha Group chairman and CEO Gautam Thapar told Hindustan Times.

The group, which also has interests in power and food, has set a target to achieve a turnover of $10 billion (about Rs 46,000 crore) and a market capitalisation of $25 billion (about Rs 1,15,000 crore) by 2013.

The new roadmap draws heavily from the group’s go-global drive that was launched four years ago, with several acquisitions done already.

The acquisitions were critical for the growth plans of the group’s flagship firms Ballarpur Industries Limited (BILT) — the country’s largest paper manufacturing company — and power equipment major Crompton Greaves, later rebranded as CG.

“We are looking at various service areas such as solar energy or even buying out small technology companies. We are not in a hurry though,” Thapar, 49, said.

Avantha’s genesis lies in the Thapar Group, one of India’s oldest business houses, founded by Karam Chand Thapar in Kolkata eighty years ago. It is a thriving offshoot of the old conglomerate and Thapar represents the third generation of the family, the baton having been passed on to him by his uncle, L.M. Thapar and his father, B.M. Thapar.

The new identity, Avantha, was launched in 2007.

In 2005, CG acquired Belgian firm Pauwels for 32 million euros (Rs 180 crore), enabling the company to leapfrog to the world’s top 10 power transformer companies and also became the group’s first billion-dollar firm.

It followed it up with by acquiring Hungarian switchgear major Ganz, Irish electricity sub-station equipment maker Microsol and French power distribution solutions company Sonomatra in quick succession.

“CG can do a lot more as it is a completely deleveraged company. The entire organisation system in CG is geared up for higher growth rate,” Thapar said.

Avantha also made India’s biggest overseas acquisition deal in the paper industry, when BILT took over Malaysian pulp and paper major Sabah Forest for $261 million in 2007. That made BILT a major regional player and put it in the global top 100 in the area.

“We will enter the top-20 league sometime in the future,” said Thapar, who is also an avid golfer and president of the Professional Golf Tour of India (PGTI). He counts investor Warren Buffett and business leader Ratan Tata among his inspirations.

Analysts said the paper industry is vulnerable to commodity price cycles.

“BILT, being the biggest player, may not be as adversely affected as its competitors,” said Alex Mathews, Head of Research of Geojit Financial Services.

Thapar said the paper industry will grow by 10 to 12 per cent a year in the coming years.

“If anybody can explain to me the logic why the paper industry will not grow when an economy is growing at 8 to 9 per cent, I am willing to leave the business,” he said.

In Avantha Power, the company has already completed the first phase of expansion with an investment of Rs 7,000 crore. “In the next phase of expansion, we will invest another Rs 6,000 crore which will take our capacity to 2,400 megawatts,” he said.

The company is setting up two plants of 600 megawatts each in Chhattisgarh and Madhya Pradesh, the financing for which has been already tied up.

Global Green Company, the company’s food entity, is engaged in the growing, manufacturing, distribution and selling of pickled cucumbers and other vegetables. Thapar said global ambitions were real in this line as well.