Indian manufacturing evolving with world’s pace

In the wake of Altran Group acquiring Aricent and thereby becoming a global major in the engineering sector, Huned Contractor interacts with the company’s India CEO, Sanjeev Varma, to know more about the company and its growth strategies

Q. Could you provide an update about the company’s operations in India?

Altran launched its operations in India back in 2004 with headquarters in Bangalore. Today India is one of the leading geographies for Altran Group with over 3,200 employees (excluding the recently announced acquisition of Aricent) supporting a strategic pillar called Industrialized Global Shore. Altran has a presence in key locations across India, including Bangalore, Coimbatore, Noida, Chennai and Pune. Several strategic acquisitions have been made in India over the last three years, including GlobalEdge Software, Pricol Technologies and SiConTech.

Q. Which sectors does the company focus on and what are the engineering services that the company has provided to its clients in India?

Altran India serves all major engineering and R&D sectors including semiconductors, electronics, industrial equipment and manufacturing, automotive, aerospace and telecom. We engage with leading global and Indian companies across various industry segments and offer innovation and high-tech engineering consulting services and bring in deep expertise in product design and innovation, complex systems engineering, mechanical engineering, intelligent systems and network transformation and performance.

Q. Could you provide a case study of how your services have helped an engineering company improve its efficiencies?

For instance, we helped one of our clients (a blue-chip company, global leader in manufacturing process solutions) to significantly reduce the total cost of ownership (TCO) for water jet cutting machines. We developed the entire solution from concept, detail engineering, building prototype, and testing for production readiness.

Q. What is your expansion strategy for India?

Our India strategy is aligned with Global Altran 2020. We have an Ignition Plan, which aims to drive growth through four key pillars: augmented value, Industrialized Global Shore, geographical expansion and operational excellence. India is at the epicentre of Industrialized Global Shore as a world-class expertise and talent hub. We will continue to build capabilities and scale in India to add more value to our clients in India and across the world.

Q. Which are the emerging technologies that will further enhance manufacturing operations of companies across the world?

The concepts and application of ‘smart manufacturing’ and ‘Industry 4.0’ are gaining traction and will shape the future of manufacturing. Emerging technologies such as cyber-physical systems, big data analytics, IoT, cloud computing, cognitive computing, additive manufacturing or 3D printing, and advanced robotics will play a key role in enhancing manufacturing operations across the world. We have, for example, developed an immersive remote factory control system prototype, also called digital twin, which uses virtual reality, for an airbus factory in Spain to remotely monitor and control a factory.

Q. What are the challenges you face when interacting with Indian manufacturing companies? Are all companies willing to accept change?

Manufacturing in India is evolving to keep pace with the rest of the world. Indian companies are increasingly adopting modern and emerging technologies to manufacture best-in-class products.
Altran sees itself as a key technology partner to Indian manufacturing companies in their transformation journey.

Q. What is your R&D department focused on?

Altran India plays a major strategic role in driving R&D activities of its clients. We offer clients a new way to innovate by developing the products and services of tomorrow and leverage our expertise in key technology domains such as design, digital, software and system engineering, and knowledge on hot topics such as artificial intelligence, converged systems, and cyber security.

Q. Could you elaborate about the recent acquisition of Aricent and how it will benefit the company?

Through our subsidiary, Altran US, Altran Global has entered into a definitive agreement to acquire Aricent, a global digital leader in design and engineering services, from a group of investors led by KKR, for a total enterprise value of USD 2 billion in an all-cash transaction.

The transaction has been unanimously approved by Altran’s Board of Directors and is expected to close in Q1 2018, subject to receipt of antitrust approvals and satisfaction of customary closing conditions. Following the transaction, the combined entity will become an undisputed global leader in ER&D services, a market expected to be worth Euro 220 billion by 2020.

Aricent is a global digital leader in integrated design and engineering services, primarily serving clients of the communications and technology, semiconductor and software industries. Headquartered in Santa Clara (California), Aricent brings design and engineering capabilities to help its clients get to market faster, transform legacy products to digital, and create new revenue opportunities. Among the company’s assets is the iconic brand Frog, which has, provided world-class design and client experience capabilities, outstanding knowledge and intellectual property for the telecom, software and semiconductors industries. Aricent also has solid experience in shaping large engineering outsourcing deals and key capabilities in key emerging technologies including artificial intelligence, cognitive systems, Internet of Things, and software frameworks.

As Dominique Cerutti, Chairman and CEO of the Altran Group, recently said, “Through this acquisition, Altran will be uniquely positioned to offer an unmatched value proposition to its clients and outpace competition.”

Altran will now have superior scale and scope, and now masters all four critical criteria necessary to lead the industry: a global presence and reach, leadership across most industries, strong expertise in key technology domains and a superior global delivery supply chain. This transaction acts as a catalyst, allowing us to achieve Altran 2020 strategic goals as early as 2018. Also, current and future shareholders will benefit from this value-enhancing acquisition, delivering EPS accretion immediately while preserving our robust financial profile.

Q. How will this work out in terms of financial benefits?

This acquisition is expected to generate Euro 150 million of additional revenues, translating into Euro 25 million EBITDA run-rate synergies and Euro 25 million of delivery and cost synergies. These synergies are expected to be delivered progressively within three years, with implementation costs representing close to one year of cost synergies, to be spread over 2018-2019.

The deal is expected to be EPS accretive from the first year, and double-digit accretive when taking into account run-rate synergies. Altran has obtained a full financing package for the transaction, which is intended to be refinanced in part through a Euro 750 million rights issue, subject to shareholders’ approval and market conditions.