AIG arm eyes stake in nuke equipment maker
AIG Global Investments, the private equity arm of the American International Group (AIG), is close to picking up a minority stake in Avasarala Technologies for $20 million.
By Shishir Prasad, TNN |
MUMBAI: The Indo-US Nuclear Treaty signed by Prime Minister Manmohan Singh and US President George W Bush in 2005 is beginning to have its effect. AIG Global Investments, the private equity arm of the American International Group (AIG), is close to picking up a minority stake in Avasarala Technologies for $20 million.
“We are in talks for an investment, but it will be a week before something is finalised. We will need the capital to grow our nuclear and space divisions,” said TT Mani, MD, Avasarala Technologies. Avasarala is a Rs 200-crore company, based in Bangalore, that manufactures components for nuclear reactors used in generation of electricity.
To be specific, it makes and installs equipment and sub-assemblies in reactor engineering, which even has an expertise in material-handling systems and refurbishment of nuclear power plants. It also makes Tungsten wires in light bulbs and electron guns used in TV picture tubes, but its most interesting facet is the defence and space research division, which accounts for almost 70-80% of its turnover.
The 22-year-old firm was initially founded by eight Bharat Electronics employees. It started off as a project consulting company and later got into specialty manufacturing. Over the past 7-8 years, it has perhaps become the only start-up to compete in the nuclear power machinery sector.
It has its key customers like Nuclear Power Corporation India (NPCIL), ISRO and various R&D labs. Established firms such as Larsen & Toubro, Godrej & Boyce, Machine Tools Aids & Reconditioning (MTAR) and Walchandnagar Industries dominate the nuclear power machinery sector in India.
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The investment assumes importance because experts believe that this deal could set the tone for investments into those Indian companies that stand to benefit from the emergence of the civilian nuclear sector after the Indo-US Nuclear treaty. When completed, this will be the first private equity deal to have taken effect in the nuclear power space. It’s also an indication of the commercial spillovers that will flow from the treaty.Why is this sector — nuclear reactor machinery — exciting given that only 3% of India’s power needs are met through nuclear power at the moment? The government, through the Kakodkar Committee report, has envisaged an increased role for nuclear power.
According to a Tata Energy Research Institute (TERI) report, nuclear power production could reach at least 70,000 MW in 2020 from the current 3,700 MW. While coal will still be the mainstay of power generation, the poor quality of coal in India — 35-50% ash content — will be a problem from both an economic as well as environment point of view. In fact, 55 rakes of full coal move across the country daily.
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