MUMBAI: Private equity firm Oman India Joint Investment Fund (OIJIF), backed by the State Bank of India and State General Reserve Fund of Oman, has invested Rs 100 crore in auto component maker Divgi TorqTransfer Systems Pvt. Ltd to fund its capacity expansion and diversification into new product categories.
The Pune-based company makes automotive drivetrain systems and components, specialising in four-wheel drive solutions and synchroniser systems. It is banking on emerging growth opportunities for electric and hybrid vehicle systems along with BS VI technology for expansion.
OIJIF, a mid-market private equity firm, recently announced the second close of its second fund, OIJIF II, with commitments of $230 million.
“Divgi-TTS is the first investment made from OIJIF II. The auto industry is undergoing fundamental changes and Divgi-TTS has all the right ingredients such as robust internal control systems and superior technological capabilities to exploit the growth in the sector,” said OIJIF CEO Srinath S.
The auto component maker sees great opportunity in sports utility vehicles or SUVs, a segment which is among the fastest growing in India’s auto sector, thanks to its range of four-wheel drive systems.
“We are uniquely placed to build a strong Indian Tier 1 brand for product leadership. Oman India will be a highly valued partner that will give us tremendous force multiplication and leverage in realizing this vision of global product leadership,” said Jiten Divgi, managing director, Divgi TorqTransfer Systems.
Two years ago, Divgi-TTS accelerated diversification of its product offering with the expanding customer base. It has since added several new products that find application in the new age electric and hybrid vehicles. In focus is the Dual-Clutch Transmission, India’s first indigenous dual-clutch automatic transmission with compatibility for hybridization, claims the company.
The company is eyeing opportunity in products designed to boost fuel efficiency and overall vehicle performance as India adopts Euro VI emission and Corporate Average Fuel Efficiency (CAFÉ) norms.
The company has also come out with eGearDrive gearbox for Battery Electric Vehicles, BEV’s, with its proprietary electronically controlled Park Lock System.
In a short span, the Company has added leading car manufacturers from nearly all the geographies including the US, Japan, Europe, China, Korea and Russia to its customer base. Divgi-TTS proposes to use the funds for further capacity expansion to cater to the demand from these new products and markets.
Its customers include leading carmakers from the United States, Japan, Europe, China, South Korea and Russia. That’s why exports account for 50-60% of its revenues. It counts Tata Motors, Mahindra and Mahindra, Ford, Toyota and Nissan among its customers.
The company also operates a small warehouse in the US. It also exports 12-16 per cent of its sales to South Korea.
Divgi-TTS is optimistic of scaling up its revenue to Rs 500 crore by 2020 from the current Rs 150 crore.
Divgi TorqTransfer Systems (Divgi-TTS) is eyeing opportunities in the six and seven speed dual clutch transmissions (DCT) space that will be created as the country transits to BS-VI emission norms by April 2020.
The 1.2-1.5L SUV and premium hatchback segments will need to shift to six-speed transmissions up from the current five-speed manual transmissions. This will throw up a huge growth potential for component suppliers like Divgi.
In addition, a demand for the company will be generated in the 2L diesel category for six-speed manual transmissions in rear wheel drive vehicles.
Divgi-TTS develops and supplies transmission and transfer case components, subsystems, and complete systems for various automotive applications.
Jitendra B Divgi, managing director of Divgi-TTS, told ETAuto that he sees the business scaling up rapidly with the government’s new policies. He is bullish on the company developing components and systems for electric vehicles (EVS) as well by deploying its transfer case technology into transmissions for EVs.
“It will require a different design for EVs but we will be able to use certain electro-mechanical actuation devices and controls required for the transfer cases and integrate them into transmissions for electric vehicles. This will give us a distinct advantage over competition globally, since we already have proven technology for it.”
Striking out on their own after the exit of BorgWarnerTorqTransfer Systems of USA from their joint venture, Pune-based Divgi-TTS has given two prototypes designed for EVs to customers for testing in India.
While continuing with BorgWarner technology, Divgi has also tied up with technology houses in Germany to further hone a new range of products to comply with the challenge of BS-VI emission norms.
This demand stems from the fact that BS-VI will impact the driveline necessitating the utilization of a six-speed transmission. As engines inherit improved technology in terms of turbocharging, the power and torque density of the engine will scale up.
With new businesses in its kitty, Divgi-TTS is optimistic of scaling up its revenue to Rs 500 crore by 2020 from the current Rs 150 crore. The supplier was till now limited to offering specific products for the four-wheel drive space under the JV, but has now extended its product basket to offering integrated solutions for four-wheel drive systems.
Divgi said the company will soon be bringing a new product from the BorgWarner stable for the front wheel drive for all-wheel drive vehicles.
“In the 2-2.5 L engine range, the torque could go up from 320Nm-350Nm to 420Nm or 450 Nm, so we are developing a six-speed manual transmission for rear wheel drives that complements our line of transfer cases very well. We have already built the proof of concept prototypes and the product is undergoing testing and this combination has actually enabled us to reach out to the global market,” elaborates Divgi.
Divgi currently has designs for six and seven speed transmissions for a range between 300Nm and 200Nm.
To tap LCV segment
The company plans to tap the light commercial vehicle segment up to 6T and SUVs for transmission designs to meet the requirements of 2.5L engines.
Besides a push to six-speed transmissions, Divgi sees more automation on the radar along with newer technologies of automated manual transmissions, continuously variable transmissions and dual clutch transmissions set to gain ground.
Currently, these constitute a niche segment.
DCT is a type of automatic transmission that uses two sets of clutches for odd and even gear sets. It involves using two separate manual transmissions with clutches within one housing.
Divgi-TTS is open to licensing its technology to OEMs as well, to enable them to manufacture transmissions in-house as OEMs are believed to be sitting on a lot of capacity. The advantage of DCTs is that it can harness existing manual transmission capacities of an OEM using not only the in-house capacity but that available in the supply chain as well.
The company has already received RFQs from customers. Its designs are ready and are complemented by a clear supply chain strategy that reaches out into a global supply chain; a big chunk of it coming from China, besides a significant portion contributed by India, USA and Europe.
“In the heavier duty engines above 2L that will be introduced in SUVs, our take is that in rear wheel drives there is a huge amount of capacity in the world on conventional stepped automatics of the types manufactured by ZF, Ford and General Motors,” admits Divgi.
He believes that one of these companies will bring the rear wheel drive automatic to India forced by economics. The problem in India is that automatic transmissions are increasingly finding acceptance in the above Rs 16 lakh price point vehicles, whereas premium hatchbacks, entry level sedans are steadily becoming feature rich and are stylishly designed in the Rs 8-12 lakh range but have few models offering superior automatic performance.
Hence, Divgi-TTS is working on facilitating mass players to offer a competitive price point maintaining the same quality and reliability as a premium vehicle using a DCT.
The company is targeting the global market for supplying integrated solutions with transfer cases. It has signed agreements with a couple of European customers for it as well.
Moving into synchronizer ring technology
With the compact utility vehicle segment being the fastest growth driver in the passenger vehicle market today, front wheel drive solutions that provide better traction in slippery conditions can be a new business stream for the company.
Divgi sums that even if they are able to muster a 10 per cent market share in this field, they would be producing 40,000 -50,000 units a year. Not a small feat for a local player.
Since moving out solo from August-September 2016, Divgi-TTS has expanded into transmission synchronizer ring technology with steel synchronizers using carbon lining.
Mahindra’s Scorpio sees large scale deployment of this technology for the Indian market. The company was locally assembling transfer cases and four-wheel drive systems under the joint venture with BorgWarner.
With three manufacturing facilities, Divgi has adequate space to further consolidate and expand in the existing premises.
Currently, global business accounts for 50-60 per cent of the revenue and is expected to continue at the same level as the supplier has confirmed orders and contracts from China, Korea, Europe and the US.
The company operates a small warehouse in the US and has several strong suppliers in China for machine parts and oil seals. It also exports to China with the trade balance tilted in favour of exports. It also exports 12-16 per cent of its sales to South Korea.