Sona Comstar sets up new merger & acquisition committee

At a time when companies are actively scouting for strategic partners or collaborations to capitalize on the rapidly evolving India’s automotive landscape, the board of auto component major Sona BLW Precision Forgings (Sona Comstar) has constituted a new Merger & Acquisition committee. 

The exact purpose of setting up such a committee right now is unclear. However, the company said the committee will review, evaluate, scrutinize and consider all proposals for making investments (including acquisition), divestments, strategic alliances/technological tie-ups and foreign collaborations, and make appropriate recommendations to the board.

The new committee’s role also includes approving “merger or de-merger or arrangements, approve entry into a new vertical.” Sona Comstar’s non-executive director Sujay Kapur will be the chairperson of the M&A committee. Apart from Kapur, the committee will have two other members – MD and Group CEO Vivek Vikram Singh, and independent director Manisha Girotra.

The Gurugram-based company manufactures automotive components such as transmission gears, electric vehicle traction motors, and conventional and micro-hybrid starter motors for passenger and commercial vehicles. Battery electric vehicle business accounts for 29 percent of Sona Comstar’s total revenue and the EV programs constitute 79 percent of its net order book of Rs 22,600 crore.

While speaking to investors after announcing its FY24 earnings, Sona Comstar’s management noted that they plan to increase their spending on R&D. In FY24, the company spent around 2.5 percent of the revenue on R&D. “Our R&D spending is slightly lower than we should be spending. In the current financial year, we are looking between 3.3-3.5 percent,” Singh said.

Around 20 percent of the spending on R&D will be on new areas and semiconductor is a big area that the company is looking at. “We are not looking at high capex items like fabs. We are looking at what we are good at. We are an engineering company, and we will do engineering-related things. So, like can we do more in chip design, or in various kinds of signal processing,” he added.

Last year, Sona Comstar acquired Serbia-based radar sensor company Novelic to make sensors and software a pillar for growth in the future. The company has lined up Rs 1,000-1,200 in capital expenditure for two to three years. Recently, the company opened a new plant in Mexico to make differential assemblies and reduction gears for electric vehicles in North America.

The company is also developing electric motors based on magnetless technology. The motor, unlike the conventional electric motors that rely on magnets to create a rotating magnetic field, eliminates the need for magnets. Sona Comstar has tied up with Enedym and IRP to develop the magnetless motor. The management noted that the collaboration with Enedym is progressing well and is hopeful that the technology will be a great success