UK's Caparo plans £100mn India spread

MUMBAI: Caparo, the UK-based speciality steel and engineering group headed by Lord Swaraj Paul — the Labour peer — plans to spend over £100 million on acquisitions and greenfield projects in India. Having completed two acquisitions in India, Caparo has initiated the process to set up eight manufacturing facilities.

“I’ve been saying for 25 years that India is going to be a big manufacturing country and it is now coming true,” Lord Paul told ET.

Caparo plans to invest its cash in India over the next 3 to 4 years in building up to eight new plants, over and above the four it already operates in the country. The aim is to expand Caparo’s sales in India from £25 million last year to £130 million in 2008 and, in the process, boost employment in its India plants. Caparo’s new facilities are coming up in Chennai, Pitampur, Bawal, Noida and Gurgaon.

Caparo Engineering India — the subsidiary of the Caparo group — has recently completed the acquisition of the sheet metal business of International Auto, the flagship company of RSB Group. In September last year, Caparo Engineering had acquired the assets of Steel Tubes of India, a Dewas-based company near Indore.

Caparo’s new India focus stems from the drop in profit the group suffered in 2005. Caparo suffered a 43% fall in overall operating profit in 2005 compared to 2004.

In 2005, the company made £28.4 million in operating profit on sales of £694 million, after showing an operating profit of £49.3 million in 2004. In 2006, Caparo is expected to see operating profit recover to £40 million on sales that would stay roughly constant.

Of Caparo’s total sales in 2005, the UK accounted for just under a half and the US about a third, with continental Europe comprising about 15%.

Lord Paul said the India expansion would not detract from Caparo’s operations elsewhere but would be geared entirely to meeting what he saw as much higher demand in India in coming years.

Much of the higher production from Caparo in India would be channelled to the company’s existing customers in the vehicle industry, including General Motors, Ford, Honda and Suzuki.

“I believe vehicle production in India — now about 1 million a year — will rise by a minimum of 5-10% a year in the next few years as local demand for cars and trucks expands,” he said.

rajesh.unnikrishnan@timesgroup.com