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News: As per media sources, Minda Corporation will buy ~15.7% stake in Pricol Ltd for ~Rs 400 crore at ~Rs 209/share (close to CMP)
Views: We believe this investment will come in the form of fresh equity infusion in Pricol (market cap: Rs 2,500 crore) as promoter stake is already low at ~36.5%. Overall, this will aid Pricol towards funding its capex for its future growth requirement amid ambitious targets of Rs 4,000 crore topline by FY26E vs. ~Rs 2000 crore expected in FY23E. From Minda Corporation's standpoint this acquisition seems less rewarding in the near term with Pricol expected to earn ~Rs 120 crore of PAT in FY24E resulting in ~5% return on investment as profit from associates. Further, to fund this, Minda Corp has ~Rs 145 crore of unutilised proceeds from QIP issued in FY19. We await official communication on the same to gauge further financial implication for both entities
Impact: Neutral