Hero Electronix, backed by Suman Kant Munjal, is planning to sell a 25-30% stake in Bengaluru-based semiconductor design and engineering company Tessolve, cashing in on the growing investor appetite in the space, said people aware of the matter. Munjal is chairman of Rockman Industries, one of the oldest Hero Group companies that manufactures automotive components.
The company is said to be in the process of mandating an investment bank for the stake sale. Tessolve said it’s not engaged in fund-raising talks.
Two years after its last capital round, majority shareholder Hero Electronix is looking to generate $120-150 million (Rs 1,000-1,260 crore), said the people cited above, pegging Tessolve’s value at $400-450 million (Rs 3,300-3,800 crore).
Plan to Set Up More Facilities
It’s seeking 20 times the FY25 ebitda, expected at $20 million, said the people cited above. In 2022, Tessolve was valued at Rs 1,023 crore.
“We are currently not in discussions with any investor for fund raise as we are fully equipped to fuel our strategic initiatives independently,” said Tessolve cofounder and CEO Srini Chinamilli. “Having completed 20 years in the industry, our growth trajectory includes a healthy balance sheet and growth momentum, with a 20% compound annual growth rate (CAGR) over the past few years. Our revenue surpassed Rs 1,000 crore in the last fiscal year.”
Founded in 2004, Tessolve says it has a client list that includes 80% of the world’s 20 largest semiconductor firms, offering end-to-end solutions from semiconductor design to testing to production and embedded software. Hero Electronix holds about 58%, followed by Singapore-based private equity firm Novo Tellus Capital Partners (32%). The rest is held by cofounder Raja Manickam, Qualcomm Ventures, investor Mike Bartley, angel investors, and employees with stock options.
It has over 3,000 workers in 10 countries, including the US, UK, Germany, Canada, Japan, Taiwan, Philippines, Malaysia and Singapore.
Hero Group’s electronics venture Hero Electronix acquired Tessolve in 2016 from Manickam. Suman Kant Munjal is the son of Hero Group founder Brijmohan Lall Munjal and older brother to Pawan Munjal, chairman of Hero MotoCorp.
PAST ACQUISITIONS
Tessolve plans to set up more facilities in India and abroad. It’s close to acquiring a company in Europe with an announcement due this week, said the people cited above. “We have been looking to raise money for expansion,” said a senior Hero Electronix executive. “However, the quantum of stake sale and valuation details are yet to be finalised.”
Since its launch, Tessolve has made several acquisitions. In 2022, it bought Bengaluru’s Pico2 Femto Semiconductor (P2fsemi), primarily focused on physical design solutions. Prior to that, in 2020, it took over Test & Verification Solutions (T&VS), which provided design services. Tessolve had acquired US-based Dynamic Test Solutions in 2010.
The Indian semiconductor segment is projected to grow at 20% CAGR, reaching $80.3 billion by FY28 while the global market is expected to hit $1 trillion by 2030. The government launched the India Semiconductor Mission (ISM) in 2021 to encourage foreign investment and domestic startups. The government’s ISM 1.0, launched with a financial outlay of Rs 76,000 crore, has drawn interest from global firms, with several of them launching and announcing projects.
Source: Economic Times