Why Pricol Could Be A Buyout Target For Minda?

Minda Corp. purchased a 15.7% stake in automotive parts manufacturing peer Pricol Ltd. from the open market, after promoters of the target company refused to sell part of their shareholding.

"The promoters of Minda Corp. reached out to me many months ago, asking whether we were interested in selling our stake in the company," Vikram Mohan, managing director at Pricol, told BQ Prime in an interview. "And I very clearly told them that we don't."

Minda, too, clarified that it's "merely" a financial investment without acquiring any special rights in Pricol, other than the rights of a shareholder. The transaction, however, has set off speculation about a potential hostile bid.

Minda hasn't responded to BQ Prime's queries for comments.

Promoters owned 36.53% in Pricol, as of December. And Minda is held 64.5% by its promoters. PHI Capital is the common shareholder between Pricol and Minda Corp., owning 5.7% and 4.96% stakes, respectively.

The revenue of Minda Corp., part of the larger Minda Group, rose 59% over a year earlier to Rs 3,225.4 crore in the first nine months ended December. Pricol reported a revenue of Rs 1,434.93 crore, up 27%, during the period.

Product Categories

An acquisition would help Minda consolidate its position in the instrument cluster division, gaining from a strong portfolio of products.

Minda has identified instrument cluster as one of its strategic pillars of growth and has been increasing its focus. The segment contributes around 10% of its revenue, as of now.

Pricol is the leader in instrument clusters with a market share of more than 50% in two-wheelers and 75–80% in commercial vehicles, according to DART Research. It is also a major supplier of telematics—or wireless flow of information from and to the vehicle—in the off-roader and tractor segments.

Pricol's product verticals include:

• Driver information and connected vehicle solutions: Connected vehicle solutions, e-cockpit, TFT clusters, instrument clusters, heads-up display, telematics, sensors and battery management system. Instrument cluster is part of this segment.

• Actuation, control and fluid management systems: Fuel pump module, disc brake, oil pumps, variable displacement oil pumps, water pumps, electrical coolant pumps, wiping systems and cabin tilting system.

The portfolio will aid Minda’s offerings, which is focusing on including large-sized TFT displays, connected clusters, telematics, sensors for safety, advanced driver-assistance systems.

Minda’s revenue of Rs 500 crore in the instrument cluster business comes largely from tractors, and some from commercial vehicles and two-wheelers, according to its investor presentation and DART Research.

And the company is moving from mechanical clusters to incorporating the latest technology of TFT and is also gaining traction in the passenger vehicle space.

It has also secured large orders for TFT clusters from key automotive original equipment manufacturers in the passenger vehicle segment in India. The company is targeting the fast-growing EV market with products like smartkey, PCDC converters, battery chargers, IPS, and telematics. Orders were won across segments, with EV accounting for 24% of orders received during the first nine months of fiscal 2023.

Balance Sheet

Pricol is a debt-free company with a cash of Rs 150 crore on books.

Minda Corp. has a gross debt of Rs 413 crore, including Rs 95 crore in long-term and Rs 320 crore in short-term borrowings, according to its third-quarter earnings. Its net debt stood at Rs 56 crore.