Ashok Minda backed Minda Corporation Limited has lined up over $100 million (Rs 747 crore) investment over three years in its endeavour to outpace a slowing market by transforming from an auto-part supplier to a system supplier.
On Tuesday, Minda Corporation, a part of Spark Minda Group, bought back a stake from Stoneridge in the Minda-Stoneridge JV, thereby taking full control of its automotive instrument cluster and sensors business – opening doors for future acquisition opportunities. The company is actively scouting for inorganic growth opportunities in the sensors and electronic space to acquire more value per vehicle in the coming years.
Ashok Minda, chairman of Minda Corporation, told ET, the company is aiming to grow 10% faster than the market. The intent is to build capabilities through organic and inorganic ways to attain the target.
“Our technical collaboration with Stoneridge continues – or rather we have expanded our technical scope-, however, after the stake buy, there is a flexibility for us to go in for newer collaboration to access technological products and offer a wider product to customers,” added Minda.
To be sure, the group already entered into JVs and partnership this calendar year with a South Korean company Infac in the auto electronic space of Antennas, and it also allied with Israeli company Ridevision or ADAS.
The Spark Minda Group is evolving to keep pace with the fast-transforming automotive industry that focuses on electrification and connectivity. The company is mapping the consumer trends and government regulations closely and will be looking at adding more technology-led products in the future.
Minda says the role of sensors in the vehicle will only grow in the future, and the Group is looking at inorganic opportunities or technical collaboration in the sensor space to expand the portfolio.
On the rationale behind the complete takeover of the Stoneridge JV, Minda said the acquisition would be value accretive for shareholders as the group’s financial performance will strengthen. The company will have perpetual ownership of all existing technology licenses granted by Stoneridge.
Stoneridge Inc is helping the Company in its current need to serve its customer, as the localisation of EGT/EGRT sensors became compulsory in all the diesel vehicles post-transition to BS-VI. The usage of the same will increase once the OBD II norms kick in from April 2023.
The company says the deal is value accretive to all the shareholders as it improves the company’s EBITDA margin and the return on capital employed, i.e. ROCE. Based on the financials of FY21, Minda Corporation is trading at EV/EBITDA of more than 15, whereas the deal at which they have acquired the remaining stake in the JV is less than 6. This creates value to the shareholders from day 1 as it is EPS accretive also.
The acquisition of the 49% stake was made at an enterprise value of Rs 240 crore.
The 100% ownership in the company would add to the topline worth of around Rs 400 crore in the consolidated financials. Being a JV company, the financial performance of the JV is only reflected in the minority interest component of the company.
The JV had around Rs 80 crore cash on the book; therefore, Minda Corp will fork out around 70-80 crore to buy Stoneridge’s remaining 49% stake. Of the total amount paid to Stoneridge, nearly half would be raised through debt. Stoneridge has made a profit of around 10 times on its investment in the JV. It invested around two million dollars and exited at around 20 million dollars in the fifteen-year period.