As the Italy-based Carraro family raises Rs 1,250 crore from the Indian equity market, Shahkar Abidi traces the growth of the eponymously named auto components manufacturer.
13 Feb 2025 | 6744 Views | By Shahkar Abidi
Sometime in 1997-1998, Carraro S.p.A., the Italian manufacturer of tractor and construction equipment components, planted its roots near Pune, India through a joint venture with Escorts Ltd. This marked the company’s first foray into the subcontinent.
Back then, the assembly plant operated on a single shift, wrapping up by ...
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Sometime in 1997-1998, Carraro S.p.A., the Italian manufacturer of tractor and construction equipment components, planted its roots near Pune, India through a joint venture with Escorts Ltd. This marked the company’s first foray into the subcontinent.
Back then, the assembly plant operated on a single shift, wrapping up by 5 p.m., and a peculiar nightly ritual followed: the emergency exit was locked the moment the last worker left the floor. The rationale for this seemingly paradoxical practice: Inside the assembly area lay a treasure trove of valuables—copper seals and brushes among others—prized for their value in the scrap market. A couple of these seals could fetch upwards of Rs 500 outside, enough to tempt a petty thief to sneak in. Locking the emergency door, it was thought, could reduce the chances of an easy theft.
Mario Carraro, the eponymous founder of the Carraro Group, spotted the locked emergency exit during one of his visits to the Pune factory. Turning to Dr. Balaji Gopalan, now the Managing Director of Carraro India, he asked, “What is this door for?”
“It’s an emergency exit,” Gopalan explained, adding that it was secured at the end of each shift. Carraro’s response was immediate and unequivocal. “Never lock it,” he instructed.
His reasoning, as recounted by Gopalan nearly three decades later during a pre-IPO press conference in Mumbai, was startling in its clarity: “If a robber sneaks into the factory and hides, and there’s a fire, I don’t want even a robber to die inside a Carraro facility.”. Safety, he stressed, must transcend profit margins or the temptation to manage theft with measures that could risk lives. “Handle theft separately,” he advised, “but when it comes to safety, it’s for everyone—employees, visitors, even robbers.”
27-years later, as Carraro Group readies itself to step onto the public stage with its long-anticipated IPO, one figure remains notably absent from the celebrations: Mario Carraro, the venerable founder who now nears his 95th year. Age and the constraints of distance have kept him from traveling to witness this defining milestone—an achievement built on decades of his steadfast leadership. Yet, even from afar, Carraro’s influence looms large. He remains in close contact with the company’s top management, staying intimately informed about the latest developments in the enterprise he so carefully shaped.
IPO Plans
Carraro India, a family-owned company, is stepping onto the public stage with an initial public offering of up to Rs 1,250 crore. Notably, the IPO consists entirely of an offer for sale, meaning that the funds will accrue entirely to shareholders, and not to the company itself. After the IPO, the promoter family's stake has fallen to 68.8% from 100%. India, already among the global powerhouses for manufacturing tractors and machinery, is steadily positioning itself as a viable alternative to China in these sectors, and Carraro aims to seize the opportunity.
At the same time, the offering was scaled back from the Rs 1,812 crore planned earlier. So, what prompted the reduction?
According to Tomaso Carraro, vice chairman and chief CSR officer and a member of the promoter family, the decision had to do with maintaining the headroom for future growth. “We found that this was the right number that will keep the family, the company, in Italy, in full control, but will also give us the opportunity, in the future, to do further operations in India.”
This delicate balancing act reflects not only the family’s insistence on maintaining strategic control but also the family’s conviction about the company’s value and valuation—something that insiders feel exceeds market expectations.
Practicalities, however, played no small role. Institutional demand, as gauged by the company’s bankers, necessitated a minimum issue size to ensure liquidity and robust investor interest. This led to a complex restructuring of the offering, one designed to meet the dual imperatives of preserving the family’s influence and satisfying the appetite of institutional investors.
The tension between control and growth is familiar to family-led enterprises. For Carraro, the stakes are high: equity dilution risks compromising the long-term strategic oversight the family has carefully nurtured, particularly in its home market of Italy. Yet India’s promise as a high-growth region demands capital and expansion. The recalibrated IPO size reflects an effort to thread this needle—raising enough capital to meet immediate goals while minimising dilution and retaining flexibility for future funding opportunities.
Parting with Escorts
The Carraro Group with a market size of approximately €800 million and a workforce of around 4,000 people, has established its presence across Italy, China, South America, and India. Among these, India has emerged as the largest and most critical hub, contributing 20–25% of the group’s revenue and employing half its total workforce—surpassing that in Italy.
Carraro’s manufacturing journey in India began in 1997 with a focus on transmission systems. By around 2000, the company had expanded into axle production, setting the stage for its evolution into a supplier of engineering solutions to original equipment manufacturers (OEMs). Drawing on intellectual property licensed from other entities within the Carraro Group, the company quickly established itself as a key market player, leveraging its expertise in high-precision components to carve a niche for itself.
As demand grew, Carraro India added a second facility to complement the first, also located in Pune and outfitted with the state-of-the-art technology. The first, driveline manufacturing plant, spanning 84,000 square meters, boasts advanced capabilities, including casting machining, assembly, prototyping, testing, and painting—essential for producing high-performance systems used in agricultural and construction machinery. Meanwhile, the gear manufacturing plant, covering 78,000 square meters, specialises in machining and heat treatment technologies, and employs processes such as carburising, induction hardening, and nitriding. Together, these facilities form the backbone of Carraro India’s manufacturing prowess.
In India, Carraro claims to offer an end-to-end experience, seamlessly integrating design, customisation, material procurement, in-house manufacturing, supply chain management, and after-sales support in the agricultural and construction vehicle manufacturing segments. Carraro India has around 38 domestic and six global OEMs as its customers, including Mahindra’s farm equipment division, Swaraj, Tata Hitachi, Escorts Kubota Ltd., Sonalika, Bull Machine, TAFE, ACE, John Deere India Pvt. Ltd., Caterpillar, Doosan, and CNH..
For these clients, Carraro supplies critical components. For instance, in a tractor priced at Rs 10 lakh, Carraro’s axles and transmissions would account for Rs 2.5 lakh.
Yet, not every venture unfolded as planned. Carraro India’s ambitious partnership with Escorts—a storied name in India’s agricultural machinery sectors—was short-lived.
According to Gopalan, MD at Carraro, the partnership’s dissolution was rooted in diverging strategic priorities. “At the time, the circumstances were vastly different,” he explained. Escorts had plans to establish a plant in western India to bring their operations closer to key customers. But as their priorities shifted, they decided against expanding beyond their base in Delhi. Meanwhile, Carraro was eager to grow its footprint in India, particularly in its core domains of axles, transmissions, and gears.
For Escorts, vehicles remained at the heart of their business, while Carraro’s vision extended to building a gear plant and establishing an R&D center. Escorts, however, was hesitant to commit resources for this expansion. After a series of amicable discussions, the two companies parted ways. “That’s how they opted out,” Gopalan recollected. “But they continue to be one of our big customers even today.”
Carraro Technologies India
Carraro India, while muscling up its manufacturing prowess, has been quietly fortifying another cornerstone of its success: Research and Development. Like any thriving enterprise, the company's ascent has been shaped as much by its engineering ingenuity as by its manufacturing muscle.
Established in 2006, Carraro Technologies India Pvt. Ltd. was initially conceived as a specialised arm of Carraro S.p.A.’s global R&D operations. Based in Pune, the unit quickly became an integral player in designing and developing axles, transmission systems, and other critical components essential to agricultural tractors and construction vehicles.
A significant inflection point arrived on October 1, 2023, when Carraro S.p.A. made a bold move: it transferred exclusive worldwide rights, title, and interest in 153 intellectual properties for select India-focused products to Carraro India. This restructuring included an engineering services agreement that would secure technical support for product maintenance and future enhancements. With this shift, Carraro India emerged as an independent design and manufacturing hub, poised to serve both domestic and global markets.
The momentum was built up further in June 2024, when Carraro India completed the Rs 23.98 crore acquisition of Carraro Technologies, fully integrating its Pune-based R&D center and seasoned engineering team. This consolidation marked the blending of research, design, and manufacturing into a cohesive operational framework. By bringing its R&D capabilities in-house, Carraro India enhanced its capacity to deliver bespoke solutions while strengthening its foothold in the competitive Indian market. The ongoing collaboration with Carraro S.p.A. adds yet another layer of sophistication to its operations.
Perhaps most notably, the reorganisation freed Carraro India from the burden of paying significant royalties to its Italian parent. The financial dividends of this shift have been striking. Royalties dropped from Rs. 40.75 crore in fiscal 2022 to Rs. 25.60 crore in fiscal 2024, or about 1.43% of operational revenue from 2.72%. The six-month period ending September 30, 2024, saw royalties decline further to Rs. 4.45 crore, or just 0.49% of revenue, compared to Rs. 22.25 crore (2.31%) in the corresponding period the previous year.
By consolidating its R&D and manufacturing capabilities and reducing reliance on external intellectual property, Carraro India has cemented its standing as a vital player in the automotive and construction equipment sectors in the country. This newfound independence not only bolsters the company’s capacity to innovate for the Indian market but also enhances its global competitiveness.
Moreover, central to Carraro India's success is a robust supply chain, comprising a network of 220 suppliers spread across eight Indian states, complemented by 58 international suppliers. This extensive web of partnerships underscores the company’s ability to integrate local and global resources, ensuring seamless production and delivery of high-performance components.
Carraro India today competes with the likes of Comer Industries, ZF, DANA, American Axles, Linamar, Automotive Axles , Ramkrishna Forgings, Happy Forgings, Sona BLW Precision Forgings and Schaeffler India.
Accelerating Growth
Talking about the rate of growth, Gopalan highlighted that Carraro India managed to ramp up its revenue to nearly €200 million (Rs 1,820 crore) in revenue from around €100 million in 2018. The segment-wise distribution of business has however more-or-less remained constant, with agriculture contributing 45%, construction equipment (CE) accounting for 41%, and the remaining 13% coming from gears, sub-assemblies, and related components.
While the percentages have stayed largely unchanged, the absolute numbers have grown significantly as the company expanded. A similar pattern is seen in the domestic-versus-export split. The ratio of 65% domestic to 35% export has held steady over the past four years, with only minor year-on-year fluctuations—exports occasionally rising to 38% or dipping to 33%, but always within a margin of ±5%.
Doubling the revenue, Gopalan pointed out, however, didn’t happen without a transformation. Over the past four to five years, the company has invested €35–40 million in expansions, focusing on enhancing capacity and driving efficiencies. Key improvements include a 20–25% boost in machine utilisation and labor efficiency, ensuring that capacity increases not just through investment but also by optimising existing resources. "A lot of improvements have come in by efficiencies, machine utilisation, labour efficiencies. So on the one hand, we increase our capacity through investments, and on the other, we increase our capacity by improving efficiency," Gopalan noted.