Auto component manufacturer and exporter Bharat Forge Ltd has firmed up plans of acquiring an auto part manufacturing unit in Europe.

The company was eyeing three companies as possible target. It will also be investing Rs 60-70 crore (Rs 600-700 million) during the current year to augment the capacity of its plant at Pune.

BFL had earlier decided to set up a greenfield manufacturing unit in Europe to supply overseas clients. This was later dumped and it has now firmed up plans of acquiring a plant there.

"At present we are conducting due-diligence of these three plants and will start negotiations soon," explained B N Kalyani, chairman and managing director, BFL. The due diligence and other negotiations were being done by the company itself.

When asked on the possible cost of the proposed acquisition, Kalyani said the three plants were of different sizes and the amounts required to acquire them would range between $15-100 million.

"We will acquire one company depending on the result of the due diligence. We need to be very cautious because environment issues are very critical in Europe and these issues crop up when there is a change in the management," he explained.

Talking on the source of fund for its acquisition plans, Kalyani said the entire amount was likely to be funded from internal reserves, while a small portion could come from debt.

Talking on debt, Kalyani said BFL was repaying Rs 60 crore (Rs 600 million) every year and at this rate would become a debt free company in five years.

Asked whether it would like to remain a debt free company, Kalyani said that would depend on return on equity and cost of funding.

Kalyani also said that joint ventures in the overseas market at a later stage was also being considered.

BFL sales in Europe contributed 25 per cent, China 25 per cent and the United States market 40 per cent of its total exports. Exports had grown 145.8 per cent to Rs 271.4 crore (Rs 2.71 billion) last year.

It clocked a Rs 689.2 crore (Rs 6.89 million) turnover during 2002-03. Back home, BFL would install its second 6,000 MT press line to expand the medium-sized forging segment for cars.