Minda Corporation’s move on Friday to acquire 15.7% in Pricol for INR 400 crore has literally set the cat among the pigeons.
It was swift and ruthless while sending out a clear signal that the auto component space will see volatility ahead with companies keen on consolidating their presence in a rapidly changing arena.
The flagship entity of Spark Minda meets the needs of 2/3 wheelers, passenger vehicles, commercial vehicles, off-roaders and the aftermarket in India and worldwide. In a communication to the NSE, Minda Corp confirmed the news stating it had acquired 1,91,40,342 equity shares of Pricol.
The response from Pricol, via Vikram Mohan, Managing Director, was more detailed and put things in context. “As Managing Director and representative of the Promoter Group of Pricol, I would like to reiterate that the promoter group stands absolutely committed to the company and its future prospects.
“We have turned around the company in the last few years by making it net debt-free and have set it on a firm growth path, and proved customer confidence with a healthy order book, while we continue to invest significantly in both product and process technology to keep us ahead of competition.”
According to Mohan, the promoters have absolutely no intent of undertaking any secondary sale of promoter stake nor does the company have any intent to raise equity capital of any form. This is because Pricol has “strong financial fundamentals and healthy cash profits” that will meet the needs of capital for its future growth.
He reiterated that the promoters and management “stand committed” to its stakeholders and are bullish about the growth prospects of the organisation combined with a firm financial footing.
Shareholding Pattern
Pricol's promoters hold 36.53% of its equity with the balance taken up by mutual funds (4.29%), foreign portfolio investors (12.14%), corporate bodies (10.76%) and others.
Analysts Mobility Outlook spoke to said if the MFs and FPIs stand by the promoter, a hostile takeover is not possible as they hold a combined 51.58% and Minda corp will not be able to have a controlling stake.
Simply put, a change of management is possible only if the FPIs exit. Beyond this, With Pricol turning around and giving good returns, they said there was no compelling reason for its investors to exit at this point in time.
Mohan had told Mobility Outlook in an earlier interview that for every INR 100 crore of investment, the company would get about INR 400-450 crore of turnover. It planned to invest another INR 600 crore starting from December 2022 or March 2023. According to him, these would translate into INR 1,800-2,000 crore of turnover.
“We are getting into more being a technology platform, more software and more hardware. This is what we are doing today in our DIS (driver information system) business, and we are going to keep investing money in that,” he said.
So where does this leave Minda Corp? For now, it will be content holding a stake in Pricol but if Friday’s move is any indication, there is no telling what surprise could crop up next. Pricol’s reaction was one of shock and surprise since this was literally a bolt out of the blue. How the script unfolds in the coming weeks and months remains to be seen as both companies prepare for the next tug-of-war.
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