SAMIL signs three acquisition deals worth Rs 1,475 crore in a week

Samvardhana Motherson (SAMIL), a demerged subsidiary of Motherson Sumi, entered into three new strategic acquisitions deals worth Rs 1,475 crore earlier this month. The Noida-based auto component major signed an agreement with Honda Motors to acquire an 81 percent stake in Yachiyo Industry's component business for an equity consideration of Euro 145 million (Rs 1,300 crore), with the entity being net cash. 

Currently, Honda Group owns a 51 percent stake in Yachiyo which is a publicly listed entity.  Headquartered in Tokyo, Yachiyo Industry makes sunroofs, plastic and steel fuel tanks, and plastic products and holds a 9 percent share in the global car sunroof market at present catering across key geographies. As per market experts, this acquisition would help SAMIL expand its presence among Japanese OEMs, especially Honda. 

“This deal would not only add fuel tanks and sunroofs to SAMIL's portfolio but also help it cross-sell other key products (such as plastic parts, wiring harnesses, and vision systems) across key Japanese OEMs, including Honda whose revenue mix for SAMIL would increase from a mere 1 percent to 6 percent post the deal,” analysts at Motilal Oswal said in a report. 

According to a statement from SAMIL, the company has partnered with Honda Motor, under which it will create an 81:19 strategic partnership with the latter, in which both parties will work to steer the company towards a strong and sustainable future and ensure that it is fully ready for next-generation products and technologies.

Currently, nearly 90 percent of Yachiyo’s revenue comes from Honda, with a sunroof capacity of 2.5 million units. Also, Japan constitutes 18 percent of SAMIL's revenue as compared to China at 43 percent and the US at 33 percent. 

“With no condition of limiting supply to select OEMs going ahead, we believe this deal would open doors for SAMIL to tap the sunroof business opportunity in India and the EU with more OEMs. This would also help SAMIL enhance its consolidated RoCE from its current sub-10 percent levels. The deal will close in the first quarter of FY 2024-25 and thus help SAMIL move one step forward towards its targeted revenue level of US$ 30 billion by FY 2025-26 from the current US$ 12 billion level,” Motilal Oswal analysts added. 

The Indian auto component major also announced an investment of US$ 14 million (Rs 114.97 crore) in Prysm Systems, which can be further increased by US$ 20 million for a majority stake, not less than 72 percent. This will be based on the successful delivery of the Gen-3 prototype of touch enabled display screen with embedded collaborative software which has strong potential.

Following the takeover announcements, the shares price of SAMIL  touched a new 52-week high and gained over 8 percent on 5th July’s trading session. After opening at Rs 90.61 apiece on BSE, the company's stock touched an intraday high of Rs 92.50.

In a bid to diversify its product portfolio, which is largely passenger vehicle centric, the company also acquired a 100 percent stake in Rollon Hydraulics later that week. Rollon is engaged in the manufacturing, assembly, and supply of high precision turned parts, spools, and other machined components with critical engineering applications for the agriculture and off- highway segments from its two facilities based out of Bengaluru (India).

“Our focus on being a solutions provider to our customers has been a driving force for this acquisition. We are getting access to a new industry segment of construction and material handling for our precision metal business. We believe this business is highly synergistic with Motherson’s existing business and offers ample opportunities to grow this business in India, Mexico and other geographies. This is our fifth acquisition in India in the past 12 months, reaffirming India’s importance in our future plans," Vivek Chaand Sehgal, Chairman, Motherson said. 

Rollon is engaged in high-precision machining and sub-assembly of highly complex components for the off-highway segment and has a vertically integrated unit engaged in surface treatment of machined parts. The company reported revenues of Rs 60 crore for FY2022-2023, with healthy profitability. The transaction will also provide Motherson, access to a pedigreed customer base across the off-highway industry, along with specialised machining, plating, surface treatment, and sub-assembly capabilities. The proposed transaction will contribute to the growth of the precision metals and modules division.