Business & Policy | Industry Updates

Raymond Group to Acquire business of Maini Precision  Products  Limited (MPPL)

Published: November 3, 2023
Author: Fashion Value Chain

Foray into sunrise sectors of Aerospace, Defense and EV components business

·         Strategic acquisition of 59.25% stake in MPPL business for a consideration of ₹682 crores

·         Acquisition being funded by mix of debt and internal accruals, Group to remain net cash positive post acquisition

·         Raymond Group to consolidate its engineering business of JK Files, RPAL and MPPL under one entity building scale and size

·         Gautam Maini, the founder of MPPL to lead the consolidated Engineering business

·         Transaction will pave way for an eventual strategic value unlocking in Engineering business leading to significant shareholder value creation for Raymond shareholders

Raymond Group announces the acquisition of 59.25% stake in Maini Precision Products Limited (MPPL) for ₹682 crores funded by a mix of debt and internal accruals.  The transaction will be subject to requisite regulatory approvals and is expected to be completed during the current fiscal. This acquisition is a strategic move to further strengthen Raymond’s existing engineering business with a complementing business that has presence in the sunrise sectors of Aerospace, Electric Vehicles (EV) and Defense. The consolidated business caters to the top Global OEMs and Tier 1 manufacturers across aerospace, defense, auto and industrial businesses.

With this acquisition, Raymond’s engineering business will emerge as a large-scale provider of Engineering, Automotive, EV, Aerospace & Defense components, distinctly positioned to target high-growth precision engineering products with a significant presence across international as well as domestic markets.

The acquisition will be concluded through Ring Plus Aqua Limited (RPAL), a subsidiary of JK Files and Engineering Ltd (JK Files). Post the acquisition, Raymond will consolidate JK Files, RPAL and MPPL business and will form a new subsidiary (“Newco”). Raymond Ltd. will hold 66.3% in the “Newco” that will focus on precision engineering products. The proforma consolidated revenue of “Newco” as of FY23 are ~ ₹1600 crore with an EBIDTA ~ ₹220 crore.

Commenting on the development, Gautam Hari Singhania, Chairman & Managing Director, Raymond Limited said, “This acquisition will catapult the growth of our Engineering business and will open new vistas to us for our foray into rapidly growing segments like Aerospace, Defense, and Electric Vehicles (EV). Raymond Group has always believed in the ‘Make in India’ initiative and this acquisition will also provide an impetus to China Plus One strategy that has been benefitting us. These are growing sectors with visible momentum presenting us with ample opportunities to leverage.  I am pleased to welcome Gautam Maini, founder of MPPL to the leadership team of our engineering business and we will significantly benefit from his domain expertise and his vast experience.”

MPPL has a diversified business with 11 manufacturing facilities in India across two verticals i.e., aerospace, which comprises precision products manufactured for aerospace and defense, and automotive and industrial, that comprises precision products for clean internal combustion engines, fuel injections and transmissions, EV components, hydraulics and industrial as well as agriculture. MPPL has a 70% export contribution and generated around ₹750 crore in total revenue in FY23 with 13% EBITDA margin.

Commenting on the development, Gautam Maini said I am delighted to lead Raymond’s consolidated Engineering Business. This strategic merger represents the harmonious integration of our diverse strengths, thus creating a platform for synergistic collaboration. Leveraging our core competencies, this partnership will usher in myriad opportunities for rapid growth and expansion, affording us a competitive edge in both international and domestic markets.”

In its transformation journey, Raymond has been demonstrating affirmative actions in form of selling the FMCG business, demerging the Lifestyle Business and shaping the scalable Real Estate Business. With this acquisition aimed at growing the Engineering business significantly, Raymond Group has reiterated its intent that it will continue to have three distinct vectors of growth that will create shareholder value for each of the businesses. With strong free cash generation and no major capex requirement, Raymond group will remain net cash positive post the transaction.

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