Wipro Ltd has announced that the company has signed an agreement to acquire the entire equity of Sweden-based Hydrauto Group AB (Hydrauto) for $31 million, in an all cash deal. Subject to customary closing conditions and regulatory approvals, the acquisition is expected to be completed by 03 of FY 2006-07.

Wipro's subsidiary Wipro Infrastructure Engineering (WIN) made the acquisition, a leading provider of precision engineered Hydraulic components and solutions in India.

Hydrauto, a profitable entity with positive operating cash-flows, is a leading provider of hydraulic components and solutions in Europe. Hydrauto is a Tier 1 supplier to OEMs of material handling equipment, forestry equipment, construction and earth moving machinery amongst others. For the year ended December 31, 2005, its revenues were $112 million.

The acquisition brings in strong synergies for WIN, a Tier 1 supplier to OEMs of construction and earth moving machinery, material handling equipment, heavy and medium commercial vehicles amongst other industries, in India and rest of Asia. For the year ended March 31, 2006, WIN logged in revenues of $57 million.

Hydraulic components are a global $17-billion industry and catering to the construction equipment, material handling, farm and industrial segments. Growth in India is being driven by the huge investments in the infrastructure and industrial segments.

According to Anurag Behar, managing director, WIN, 'This acquisition gives WIN a unique Asia-Europe footprint, a customer base built over the past few decades and deep complementary engineering skills. Being together will have a multiplier effect on competitiveness."

Olov Larsson, CEO of Hydrauto commented "The Hydrauto team looks forward to becoming a part of the Wipro family. We think that Wipro is a perfect fit, being leaders in Asia and having an established presence in the Asia - Pacific region.

Rajesh Ramaiah, head, Investor Relations, Wipro Infrastructure Engineering, says that Wipro has been in hydraulic cylinder business for about 30 years now and commands 70-per cent market share. Wipro saw a good opportunity in acquiring this company to get a European presence.

He told CNBC-TV18 exclusive interview with Ramaiah:

What exactly is Hydrauto and how profitable is it?
It is profitable as it generates operating cash flow. The size of Hydrauto is about $112 million. Wipro has been in hydraulic cylinder business for about 30 years now. We are leaders in India and we have close to 70-per cent market share.

We supply to OEMs (Original Equipment Manufacturers) in consistent equipment and earth moving equipment space. So we saw a good opportunity in acquiring this company to get a European presence.

Can you share some more numbers with us in terms of the net profit and margins because the price that you paid seems quite cheap?
In terms of revenues, they have achieved about $112 million last year. I would say, their margins have been a little less than 10 per cent last year.