In a strategic move to bolster its position in the automotive components sector, Pricol Limited has announced the acquisition of Sundaram Auto Components Limited’s (SACL) injection moulding business for ₹215 crore. This acquisition is anticipated to add approximately ₹730 crore to Pricol’s consolidated revenue, marking a significant expansion in its operational capabilities.
Details of the Acquisition
Pricol will execute the acquisition through its wholly-owned subsidiary, Pricol Precision Products Pvt Ltd. The transaction, structured as a slump sale, is an all-cash deal valued at ₹215.3 crore, subject to customary adjustments at the time of closing. Notably, the acquisition is debt-free, underscoring Pricol’s robust financial health and strategic planning.
Strategic Rationale
Established in 1992, SACL has been a prominent player in polymer solutions and injection moulding, operating six manufacturing facilities across India. In FY24, SACL reported revenues of ₹727 crore. By integrating SACL’s injection moulding capabilities, Pricol aims to create an independent business vertical, leveraging combined strengths to enhance its product portfolio and customer base.
Management Perspectives
Vikram Mohan, Managing Director of Pricol, expressed optimism about the acquisition, stating, “Our focus will remain on harnessing the combined potential of Pricol and SACL to become an integrated solution player, driving innovation and delivering sustainable growth.” This sentiment reflects Pricol’s commitment to expanding its market presence and delivering enhanced value to stakeholders.
Financial Implications
To facilitate the acquisition, Pricol plans to invest up to ₹120 crore in Pricol Precision Products Pvt Ltd in multiple tranches. Additionally, the company’s board has approved providing a corporate guarantee for any loans obtained by Pricol Precision, up to ₹250 crore. These financial arrangements underscore Pricol’s strategic approach to funding the acquisition while maintaining financial stability.
Expansion into New Verticals
This acquisition aligns with Pricol’s broader strategy of diversifying its product offerings and entering new market segments. The company has been actively pursuing inorganic growth opportunities, evaluating potential assets for acquisition to enhance its global footprint and diversify its product portfolio.
Future Outlook
With the integration of SACL’s injection moulding business, Pricol is poised to strengthen its position in the automotive components industry. The company plans to focus on innovation and sustainable growth, leveraging the combined expertise of both entities to deliver enhanced value to customers and stakeholders.
In conclusion, Pricol’s acquisition of SACL’s injection moulding division represents a strategic expansion aimed at bolstering its market presence and diversifying its product offerings. The move is expected to contribute significantly to the company’s revenue and support its long-term growth objectives.
