Amtel Expands into Europe
Following the news that Amtel was in “detailed discussions” with Vredestein Banden, Amtel president, Sudhir Gupta has confirmed that his company will buy Vredestein Banden and that it is planning initial public offerings (IPO) in London and Moscow in the next two years.
According to Dr Gupta, Amtel is planning a primary listing on the London Stock Exchange followed by a secondary listing on the Russian Stock Exchange. In a conversation with far eastern business publication, Business Times, Dr Gupta explained why the IPO would take place in London and not New York. “Europeans always understand Russia better than the Americans and most of the investment in Russia is European. That’s why we think London is a better place to list.” The secondary listing is also the result of ‘encouragement’ from the authorities for successful companies to list on the Russian Stock Exchange, and because “the stock exchange has good liquidity because of high oil prices.”
The listings are due to take place in one of two time frames; either October to November 2005 or April to May the year after, the Amtel president said. Currently, Dr Gupta owns about 85 per cent of Amtel. An international investment fund managed by Templeton Asset Management Ltd, owns 5.65 per cent, while 10 per cent of Amtel’s shares were recently sold in a private placement for $34.2 million. These shares were bought by about 22 institutional investors in Europe, the US and Russia.
It is clear that a key part of Amtel’s expansion plans will involve venturing outside of Russian borders. One part of this is the company’s purchase of Vredestein Banden. By purchasing the Dutch company, Amtel appears to have been aiming to buy a ready-made foothold in the market. At the moment Vredestein sells 40 per cent its tyres in Europe’s biggest market (Germany) and has well organised distribution operations across Europe.
When the news of this transaction broke, Tyres & Accessories spoke to Vredestein CEO, Rob Oudshoorn. He described the venture as a win-win situation, saying, “one plus one equals three.” When the Vredestein boss visited Amtel’s factory in the summer, he said that he was surprised to see such modern equipment, maintaining that it was of a similar standard to Vredestein’s Enschede facility.
From his point of view, there is still a quality gap between imported products and those produced in Russia. Apart from believing that it can fill this gap, Vredestein sees Amtel’s size and influence as positive factors that will help it to reach further.
For Dr Gupta, there were other economic reasons for the transaction. “We had two options, either go ahead, spend money and time to build a global brand out of Amtel or go out and do some acquisition. So we agreed to buy this brand,” he told Business Times adding “we are looking to buy 100 per cent.” According to Amtel’s president, the sale is expected to be completed by middle of March 2005. When the two companies merge, they are expected to have a combined market value of $1 billion.
Dr Gupta is surprisingly pragmatic about doing business in Russia. This is surprising, because only a few years ago he survived an assassination attempt, something that would put most people off a country. According to the businessman, the men responsible for the murder attempt have been caught and will be prosecuted very soon. Despite his experience, Dr Gupta still believes Russia is a good place to do business citing the country’s geographical position, the education of its people and its rich supply of natural resources as reasons.
How an Indian-born Singaporean made millions in Russia
Sudhir Gupta originally set foot in Russia as a young chemistry student. After being born in India he left this country at 19 when he won a government scholarship to study in the Soviet Union. Here he completed a masters and a doctorate in chemistry at the University of Moscow. At this point he had no aspirations of becoming an international businessman. Instead he was aiming to become a young professor.
This changed during Mikhail Gorbachev’s Perestroika era. Just after finishing his doctorate, Dr Gupta got caught up in the “semi-wild capitalism” that was going on. Amtel was found in Singapore in 1990 and originally began as a trading business. At the time, Russia was buying natural rubber from London and so Dr Gupta had the idea of bringing rubber into Russia and buying direct-from-source. From here the business grew dramatically.
When the Soviet Union collapsed, Amtel started looking for the companies using the 100,000 tonnes of rubber that it sold in Russia. Before this point the end-users had remained anonymous, because all of the Soviet Union’s rubber was bought by a central agency. When Dr Gupta discovered that the customers were mainly tyre plants, Amtel moved into the tyre business.
After buying shares in one of the former-Soviet tyre plants in about 1994, Dr Gupta embarked on a process of learning how to manage a tyre production plant. In due course, Amtel took over four factories (three in Russia and one in Ukraine) and today the company is one of Russia’s biggest tyre manufacturers.
Amtel produces a wide range of products from bicycle tyres to 60 tonne off-the-road vehicle tyres, including car and truck products. The company also makes high-tech tyres for Russia’s fighter aircraft, the Sukhois and MiGs. Currently, Amtel has 35 per cent of the Russian automobile and light-truck tyre market and around 28 per cent overall tyre market in the country. The company produced approximately 14 million vehicle tyres and 10 million bicycle tyres last year. Amtel also reports that it has 28 per cent share of the tyre market in the 10-nation Confederation of Independent States (CIS).
In addition to its tyre production plants, Amtel is also reported to produce 30 per cent of the carbon black produced in Russia and operates the country’s biggest synthetic fibre plant.