Avantha group eyes services biz
Gautam Thapar is on a hunt. The chairman of the Avantha Group plans to buy companies, in India and abroad, to diversify his paper-to-power $4-billion (Rs 20,000-crore) conglomerate. From manufacturing to services
Gautam Thapar is on a hunt. The chairman of the Avantha Group plans to buy companies, in India and abroad, to diversify his paper-to-power $4-billion (Rs 20,000-crore) conglomerate.
“We are looking to acquire companies in the $100-200 million range,” he told HT. “If it is bigger, it should bring strategic value and will require greater scrutiny. We need to see how we can leverage the acquisition.”
Part of the group’s strategic plan, an internal restructuring is underway that will not only help it diversify into services but also see it get out of some. “We will rejig our portfolio and exit from smaller businesses.”
And in the process, leave the group less vulnerable to business uncertainties. “We are derisking our business across geographies and across businesses. We may acquire a big business abroad and bring it to India.”
The buyouts will be in the services space — manufacturing is no longer on his agenda. “It is difficult to start a new manufacturing business with an investment of Rs 500 crore that grows into Rs 2,000 crore,” said Thapar.
“I’m not interested in any more manufacturing businesses. We have enough in power equipment (Crompton Greaves) and paper (Ballarpur Industries). Besides, manufacturing needs infrastructure, power. And the government needs to repeal the Factories Act.”
According to him, the past two decades have seen wealth creation from “regulatory arbitrage, real estate or natural resources. Auto, of course, has been a success story.”
In the next 20 years wealth will be created from services, he said. The low penetration in insurance, in particular, excites him: “This business needs investments only for the first eight to 10 years. After that it’s an annuity business.”
What about banking? “I’m not interested in setting up a bank,” he said. “The norms are too tight right now and it still has to play out.”
Beyond financial services, he’s looking at healthcare. “Medical supplies is a great market,” he said. “So manufacturing specialised products like joints could be an idea worth pursuing.”
And despite Ballarpur having 13 outlets, retailing is a business he’s not sure of. “We intend to learn the business. From the outside, retail looks glamorous but we want to learn before jumping into it.”
Investing in back-end infrastructure such as building supply chains and distribution “could be a good business” he said.
At 50, Thapar continues to be think and work like an entrepreneur. "I feel like a risk taker," he said. "Not being the CEO allows me to take a dispassionate look at businesses."
