OK Play Group, a toy to automotive part marker is set to hive-off its rota moulded plastic component business of OK Play India and OK Play Auto to Tier 1 supplier, Lumax Auto Technologies for around Rs 150 crore.
The acquisition will enable Lumax to increase its product offerings to its existing clienteles as well as gain new business opportunities. Lumax is said to pay around Rs 150 crore upfront on transaction closing or around 90 percent of the business value, with the remaining 10 percent consideration to be computed and paid based on 6 times of FY2023 EBITDA of OK Play's automotive business.
The Tier 1 has also agreed to provide Rs 20 crore loan to OK Play India at simple interest of 12 percent per annum. This has to be repaid along with interest by July 25, 2023.
According to Lumax, the acquisition will provide access to the latest rota moulding technologies and will enable it to exploit fast-emerging growth opportunities in the automotive rota moulded plastic fuel tanks market for commercial vehicles, tractors and off-road vehicles in view of changing regulatory environment.
Commenting on the deal, a company spokesperson said: “We believe the future is in light weighting. Owing to the CAFE norms and tighter packaging space availability, plastic technology will be a significant driver. OK Play has impressive experience in this highly specialised technology that has been co-developed with OEMs, that will enhance our footprint in the commercial vehicle and Farm Equipment Sector. This acquisition made strategic sense and synergises with Lumax Group’s overall strategy to drive the future of light-weighting. The products include plastic fuel tanks, combi-tanks (global patent), fenders and tractor roofs among others.”
According to the deal terms, Rajan Handa, promoter and MD of OK Play India will extend necessary support to Lumax for the auto component business. In FY2019, OK Play's automotive business reported revenue of Rs 125 crore, a growth of 15 percent YoY (FY2018: Rs 109 crore). At present, OK Play clients include Ashok Leyland, JCB, Caterpillar, M&M, Tata Motors, Daimler, BharatBenz, Volvo, Optare, Mercedes-Benz.