Targeting a turnover of $1 billion by the turn of the decade, Hinduja Foundries (erstwhile Ennore Foundries), one of the largest suppliers of castings to the automobile manufacturers and part of the Hinduja Group, is in advanced stages of talks to acquire two foundry companies in Europe. The acquisitions will be in the range of 300-500 million euros, according to sources, and the target companies are profitable, with high Ebidta margins. The inorganic growth will be supplemented by capacity additions at the company’s plants in India. While the investment for the acquisitions will come in from the promoters’ kitty, funds for the expansion is being met through private placement.
When contacted, Prabal Banerjee, chief financial officer of the Hinduja Group, said that Hinduja Foundries is eyeing inorganic growth, but declined to comment specifically on the European buys. “We are targeting inorganic growth, and we are looking at capacity expansion too, for which there will be capital raising this year end or early next year,” he said. The idea, he said was to bring group companies like Hinduja Foundries into the top league within the group.
The acquisitions and the capacity additions together are expected to bring the overall revenues of the company closer to the $1-billion mark by the turn of the decade. The company had posted revenues of Rs 451.42 crore for the fiscal 2008-09 and a net profit of Rs 16.92 crore. Its stock closed at Rs 183 on the Bombay Stock Exchange on Wednesday, a 1.8% increase from the previous closing. Set up in 1959, Hinduja Foundries is the first jobbing foundry in India for the automobile industry, according to the company’s website. It was initially promoted by British Leyland, and started commercial production in 1961. The company has major automotive manufacturers as its customers.
Recently, Farrallon-sponsored private equity firm Amansha picked up an 8%-stake in Hinduja Foundries for $20 million. The private placement was done through equity expansion via its GDR. “We have pledged a GDR at a 78% premium to the market price,” said Banerjee. “This is a benchmark in the corporate sector. The moment you buy at a premium to the market price, you have to mark to market. Despite that, the investors are so strong on the company story that they have picked up at a 78% premium.” The valuation of the company is pegged about $100 million, he added.