Auto parts supplier Sona group is set to buy Japanese partner Mitsubishi Minerals Corp’s 25% stake in their joint venture Sona BLW Precision Forgings, a person closely involved in the deal discussions said.
Sona BLW, with an annual turnover of around Rs 2,500 crore, is the flagship company of the Sunjay Kapur-led Rs 3,500 crore Sona group. The deal could close as early as this week. The person didn’t disclose the financial terms they were working on but said the value would be substantially lower than the market rate since Mitsubishi Minerals had already decided to exit forgings business and so would look to dispose of the stake immediately.
For the Sona group, taking complete ownership of Sona BLW is part of a strategy to focus on the forgings business. Last month, the group agreed to sell its 25.1% stake in listed Sona Koyo Steering SystemsBSE 0.31 % to partner JTEKT Corp of Japan for about Rs 450 crore, as it decided to exit the steering business.
“The group has decided to increase focus in forging business in which it believes it has competitive advantage and the ability to scale up. After consolidating ownership in Sona BLW, it will focus on increasing its presence in the domestic and global markets,” the person said, speaking on the condition of anonymity.
Sona BLW owns patent for the technology to produce warm forging. It has an about 20% share in the global market for the component, supplying to leading auto manufacturers.
A Sona group executive declined to comment. A Mitsubishi spokesperson could not be reached for comment.
Last month, while announcing the deal on Sona Koyo Steering, managing director Kapur had unveiled plans to invest Rs 400-500 crore in the Indian arm of its forgings business over four-five years and grow revenue from the local operations threefold to Rs 1,500 crore in five years. Its German subsidiary has a turnover of a little over Rs 1,600 crore.
“Our larger business is really the precision forging business, which is mostly gears manufacturing as of now. That’s the business in which we own the technology. We felt that we need to make more investments in a business in which we have global scale,” Kapur had said.
Source: Economic Times