Minda Corp. has lined up over $100 million (about Rs 750 crore) of investment in the next three years to outpace the slowing market by aiming to transform into a supplier of entire systems as opposed to just a few parts to automakers.
Minda Corp., part of Ashok Minda's Spark Minda Group, bought partner Stoneridge's 49% stake in the Minda-Stoneridge joint venture on Tuesday to take full control of the automotive instrument cluster and sensors business. The company is also actively seeking acquisitions in the field of sensors and electronics to increase its product offerings.
The company aims to grow 10 percentage points faster than the market, and the goal is to develop capabilities through organic and inorganic forms to achieve the goal, group president Ashok Minda told B2B.
“Our technical collaboration with Stoneridge continues, or rather we have expanded our technical range. However, after the stake purchase, we have the flexibility to choose new cooperation to access technology products and offer a broader product to customers,” Minda said.
The group has already entered into a joint venture in 2021 with a South Korean company, Infac, in the field of the automatic electronic antenna. It also formed an alliance with the Israeli company Ride Vision to offer collision avoidance technology.
The Spark Minda Group is evolving to keep pace with the rapidly transforming automotive industry focused on electrification and connectivity. The company is closely mapping consumer trends and government regulations and will look to add more technology-based products to its offering.
Minda said that the role of sensors in the car will only grow in the future and the group is looking for inorganic opportunities or technical cooperation in this technology.
On the rationale behind the complete takeover of the Stoneridge JV, Minda said the acquisition will create shareholder value as it will enhance the group's financial performance and the company will have permanent ownership of all existing technology licenses granted by Stoneridge.
US-based Stoneridge is helping the Indian company locate exhaust gas temperature gauges, which are now mandatory on all diesel vehicles after transitioning to EGR standards. The use of these devices will increase once the Internal Diagnostic Standards II enters into force from April 2023.
The company said the transaction will improve its operating profit margin (Ebitda) as well as the return on capital employed. On the basis of the fiscal year 21 fiscal year,
Minda Corporation is trading with an enterprise value/Ebitda of more than 15, while the deal in which it acquired the remaining stake in the joint venture is less than 6. This creates value for shareholders from day one as it increases earnings per share as well.
The acquisition of the 49% stake was done at an enterprise value of Rs 240 crore.
The 100% ownership in the company will add about Rs 400 crore to revenue in the consolidated financials. The financial performance of the joint venture is reflected only in the minority interest component of the company.
The joint venture had around Rs 80 crore in cash on the book and therefore Minda Corp will fork out around Rs 70-80 crore to buy the remaining 49% of Stoneridge. Of the total amount, approximately half will come from the funds raised through the offering of shares in an enterprise classified by the Minda Corporation. Stoneridge has made a return of around 10 times its investment in the JV - it invested around $2 million 15 years ago and exited at around $20 million.