Amara Raja backward integrates by acquiring plastic component business from promoter entityARE&M - 755 Change: -2.60 (-0.34 %)
In a regulatory exchange filing, Amara Raja Batteries has informed exchanges about demerging plastic component for battery business of Mangal Industries (MIL) (unlisted promoter entity) and merging it into Amara Raja Batteries (ARBL) (listed entity) for a swap ratio of 65 equity shares of ARBL for every 74 equity shares of MIL. Total ARBL shares to be issued to promoters for acquiring this business is pegged at 1.22 crore shares (acquisition value = 1.22*485 (CMP) = Rs 592 crore). Resultant promoter holding in ARBL will increase from 28.1% to 32.9%.
The plastic component for battery business at MIL has a capacity of 37,000 MTPA and has three manufacturing units. It currently generates Rs 570 crore of revenue (FY22, 39% of MIL's topline) with EBITDA pegged at Rs 98 crore (EBITDA margins at 17%) and PAT at Rs 57 crore (PAT margins at 10%) with ARBL being the sole customer. The consequent valuation at which it is being acquired is derived as 1x P/S, 10x P/E and 7x EV/EBITDA and is expected to be EPS and margin accretive from first year itself. The company also informed about Rs 5-6 crore of post-tax saving (synergies) due to this backward integration. We view this transaction as fair from the minority shareholder’s perspective and expect it to contribute positively to ARBL financials, going forward.