Kirlokar Oil Engines Ltd has forayed into pump manufacturing through an acquisition of a majority stake in La-Gajjar Machineries (LGM).
Kirlokar Oil Engines Ltd (KOEL) has forayed into pump manufacturing through an acquisition of a majority stake in La-Gajjar Machineries (LGM). KOEL announced that it has executed a definitive agreement to acquire 76% stake in La-Gajjar Machineries (LGM) based in Ahmedabad at a valuation of 7.89 times EBITDA for the year ending March 2018. The balance holding will be acquired by KOEL over a 5 year period. LGM provides KOEL a strong and established footprint into the electric pump market through its Varuna and Raindrop brand of submersible and mono-block pumps and will help KOEL consolidate its position in the diesel and electric pump segment. “Diesel pumps have always been our core competence. The demand for diesel pump is decreasing and for electric pumps it is increasing,” Antony Cherukara, V P corporate strategy and head, agriculture & allied business, said. “Electrification is rapidly increasing in rural India, with this there is a shift happening from diesel engine pump sets to electric pump sets. This increased demand for electric pump sets and the deep penetration into rural India makes this foray into electric pump sets an effective utilisation of its distribution strength,” Cherukara said.
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“KOEL has huge distribution strength in rural India and La Gajjar already has an urban network. This enables the company to tap into the larger demand for electric pumps both in the rural and the urban market,” Cherukara said. This LGM acquisition provides KOEL a strong and established footprint into the electric pump market through its Varuna and Raindrop brands of submersible and mono-block pumps, the company said. “La-Gajjar has a good channel set up in Africa and Middle East and we have a strong presence in South India and it’s just utilising the established channels to the optimum,” Cherukara said. Nihal Kulkarni, MD, Koel, said in recent years we have increased our focus on rural India by building a vast digitized network of over 500 distributors and over 25,000 retailers and through this acquisition we believe that we will be able to further utilise this huge network to deliver value for all stake holders.