Tier 1 supplier Sona BLW Precision Forgings (Sona Comstar) has signed an agreement to acquire a 54 percent equity stake for 40.5 million euro (Rs 355 crore) in Novelic, a Serbia-based company founded in 2012, which provides mmWave radar sensors, perception solutions and full-stack embedded systems.
The company says the ADAS (Advanced Driver Assistance Systems) sensors are a fast-growing category in the automotive industry, with a potential market size of $ 43 billion (Rs 354,621 crore) in 2030.
The acquisition is expected to be EPS accretive for Sona Comstar from first year and offers strong growth opportunities over the medium term. In 2022, Novelic reported revenue of 9.3 million euro (Rs 81 crore) and a net profit of 2.5 million euro (Rs 22 crore) respectively. The company has been profitable every year since its inception.
Sona Comstar as part of its strategic roadmap is foraying into the ADAS sensor market. It says Novelic is vertically integrated across the value chain from machine learning and perception software to hardware and chip design; its partners include global automotive OEMs, autonomous vehicle makers, Tier-1s and chip manufacturers like Infineon and Texas Instruments. With the acquisition the Tier 1 supplier marks the start of its third business vertical of ADAS sensors and software to address the megatrends of increasing vehicle autonomy and automation.
Global opportunities
In-cabin sensing is becoming an essential safety requirement in cars globally. Children and pets left behind in locked vehicles have resulted in thousands of fatalities worldwide due to heatstroke. Government regulations and car safety assessment guidelines mandate child presence detection (CPD) in new car models. Euro NCAP 2023 requires child presence detection for a 5-star rating.
NOVELIC’s mmWave radar technology is a said to be a leading solution for in-cabin sensing due to its – high accuracy, lower cost and privacy protection of occupants’ privacy. Through its sophisticated radar design and signal processing algorithm, its in-cabin monitoring solution detects life presence (LPD), child presence (CPD), and seat occupancy (SOD), amongst others. The in-cabin solution is highly accurate as it works under all light conditions, detects vital signs (heart rate and respiration) and locates objects anywhere in the cabin. NOVELIC’s mmWave radar-based solution removes the need for weight sensors and associated wiring harnesses, resulting in significant cost savings for carmakers. Unlike cameras, mmWave radar-based in-cabin sensing protects the privacy of occupants in the car.
The current Novelic team, led by its founders Darko Tasovac, Veljko Mihaljovic and Dr Veselin Brankovic, will continue to lead the operations, ensuring continuity while leveraging Sona Comstar’s scale and customer access for business development. The founders will hold 46 percent equity in Novelic after the completion of the transaction.
The Serbian company has over ten years of market presence and more than 130 engineers in multidisciplinary teams and holds multiple global patents in the area of mmWave radar sensing and systems. It has grown at more than 50 percent CAGR over the last 10 years without raising any external equity capital.
Expanding ADAS competencies
The acquisition will be through a combination of primary and secondary purchases with a staggered payment structure in the ratio of 60:20:20 at closing,12 months and 24 months, respectively. The transaction values Novelic at an enterprise value of 64.5 million euro (Rs 566 crore) on a pre-money basis and 75 million (Rs 659 crore) on a post-money basis, with an implied valuation multiple of 26 times CY22 Estimated PAT (profit after tax). The transaction is expected to close by the end of Q4 FY23 and is subject to customary closing conditions.
Vivek Vikram Singh, MD & Group CEO, Sona Comstar said, “I am excited to welcome Novelic to the Sona Comstar family. With this acquisition, we have added market-leading in-cabin radar-sensing technology to our technology offering. Increasing vehicle autonomy and automation is an emerging technology revolution in our industry. As we had done with EVs in 2016, we are taking a meaningful early step in the direction of the electrified autonomous vehicle or e-AV.”
“Novelic adds the hardware and software capabilities to design integrated systems for autonomous driving, including AI and ML as well as ASIC experience, to what we already have in mechanical, electric and electronic abilities. It is the beginning of building our third business vertical of sensors and software,” added Singh.
Veljko Mihajlovic, Co-Founder and CTO, Novelic said: “Novelic was founded with a clear mission to develop end-to-end capabilities in mmWave radar technology and to commercialize it through various product lines. We started as a team of 5, and today we are over 160 people, among which 130 engineers and 10 PhDs, developing product platforms at various European locations. We have managed to do it organically by providing value to our customers and generating and growing our revenue and profit year after year. For moving to the next phase of our growth, we are delighted to have a strategic partner in Sona Comstar which shares the same commitment to innovation and technology and will support us in scaling up our business. The moment we first interacted with the Sona Comstar team, we knew this was ‘the one’ because we had a great alignment of core values.”
