By: Satnam Singh By: Steve Toloken
May 22, 2013
GUANGZHOU, CHINA — Chinese compounder Kingfa Sci. & Tech. Co. Ltd. is in advanced negotiations to make an investment in Indian compounder Hydro S&S Industries Ltd., in what would be its first production outside China, executives from both companies said May 22.
In an interview at the Chinaplas trade fair in Guangzhou, a company manager at Guangzhou-based Kingfa declined to disclose details of any potential investment but suggested the two firms are in serious talks.
An article on the Indian financial news website dealcurry.com said Kingfa plans to buy 66.5 percent of Hydro for about 100 crore rupees ($18.0 million).
“Right now I can only tell you we are still negotiating,” said the manager, who spoke on condition of anonymity but was put forward by the company for the interview. “I cannot tell you the details. … We expect to sign it in a few months.”
Both companies are publicly listed on stock exchanges in their home countries.
An executive with Chennai-based Hydro said they hoped to finish the talks in six weeks.
Finance Director S. Subramanium said Hydro is interested in access to the broad materials portfolio of Kingfa, which is China’s largest compounder and one of the world’s largest, while Kingfa is interested in expanding in India’s automobile market.
Hydro employs 192 and has capacity of 29,000 metric tons per year at three factories in India, where it compounds polypropylene, thermoplastic elastomers and glass-fiber materials for auto makers, including Hyundai Motors, Suzuki and India’s Tata Group.
The Kingfa manager said the company established an internal group one year ago to focus on the Indian market, and while they see great potential, the business was stunted by customs and logistics challenges shipping from China.
Kingfa recently announced its net profit exceeded 200 million yuan in the first quarter of 2013, citing automotive as the fastest growing engine.
The company started a 800,000-ton expansion project for automotive compounds in 2012. In the same year, the company managed to boost its auto-related sales by 25 percent, while the Chinese auto market recorded a low single-digit growth rate.
According to Chinese media reports, Kingfa Chairman Yuan Zhimin said he expects the company to reach $10 billion in sales by 2015.
Plastics News China correspondent Isaac Li contributed to this report.