വളർച്ചയുടെ അടുത്ത ഘട്ടത്തിലേക്ക് കുതിക്കാൻ പ്രിസിഷൻ എൻജിനീയറിങ് കമ്പനികൾ സ്വകാര്യ നിക്ഷേപങ്ങളിലേക്ക്

Summary

Private equity funds including Blackstone, EQT and ChrysCapital are evaluating precision engineering and manufacturing businesses with the aim of consolidating such businesses.

India's family-owned precision engineering and manufacturing businesses are increasingly seeking to institutionalize operations and sign up private equity or strategic partners to scale up to the next level of growth, according to bankers and industry executives. They include Hical Technologies Pvt Ltd, CTC Group, Balaji Precision Components Pvt Ltd, Gemsons Precision Engineering Pvt Ltd and Rabwin Industries Pvt Ltd.

CTC Group, started by Ramesh Kumar Agarwalla and Gokul Kumar Agarwalla in 1983, has mandated Avendus Capital Pvt Ltd as an adviser to sell a minority stake and raise about $50 million to fund its growth plans, at least two people said. Hical, based in Bengaluru and founded by Shashikiran Mullur in 1988, is looking to raise a similar amount for a minority stake sale, they added.

Balaji and Coimbatore-based Rabwin are in talks for a majority stake sale and have roped in EY as an adviser to help find buyers. Both businesses are seeking a valuation of ₹2,500 crore-3,000 crore, two other people said. Balaji was founded by Vikash Kumar in 2002, according to Tracxn.

While Balaji's deal has undergone several on-off cycles, private equity funds including Blackstone, EQT and ChrysCapital have evaluated Rabwin as part of a platform play strategy to consolidate such businesses.

EQT and Avendus declined to comment on specific deals, while Mint's emails sent to the others did not elicit a response till the time of publishing.

Gemsons' promoters are looking to sell a controlling stake in a deal that may value the company at about ₹1,000-1,200 crore, Mint reported earlier this month. Initial feelers have been sent to private equity firms including EQT, Carlyle, Blackstone and ChrysCapital, according to people familiar with the matter.

Automotive components

The trend began with deals in precision engineering and metal processing within the automotive components sector, where several Indian companies have built deep capabilities and established global market leadership, explained Ashish Gulati, partner and head of corporate finance at KPMG India. Over the years, PE-led consolidation of some of these businesses facing succession challenges has magnified this trend.

"Global bulge-bracket investors like Blackstone, Bain Capital, Carlyle, Warburg Pincus have taken the lead in consolidating multiple such businesses to form 'platforms.' Sona Comstar, the then Blackstone-owned platform, went for an IPO in 2021 while several others are lining up to do IPOs in the next 12 months," Gulati said.

Many of these companies serve customers across the US and Europe, leveraging India's competitive advantages in iron and steel manufacturing and metal processing, including forging, casting and machining, supported by lower labour costs.

The sector has delivered strong earnings growth since covid and offers a long growth runway, particularly as comparable businesses in the US and Europe shut down or scaled back operations.

"The need for diversification away from China to secure supply chains for global companies can't be overstated. Some of these companies such as Happy Forgings Ltd, Belrise Industries Ltd and Sansera Engineering Ltd have gone public and have created wealth both for promoters as well as investors/public shareholders," Gulati said.

Aerospace, defence

Non-automotive precision engineering businesses catering to oil and gas, power equipment, aerospace and defence, data centres and general engineering are now increasingly gaining investor attention and emerging as the next big opportunity in the space.

"It has a high entry barrier as qualification with customers could take many years. Once qualified, the customers tend to be sticky," said Koushik Bhattacharyya, managing director and head of industrials investment banking at Avendus Capital. "Currently, within precision manufacturing, companies with good scale and RoCE are highly sought after by PE funds."

He added that private equity interest in precision manufacturing is strong, given its proxy to multiple high-growth end markets, including aerospace, defence and other advanced manufacturing segments. Some businesses are more profitable, capital efficient and growing faster than their automotive peers, though off a smaller base, according to Gulati.

"Companies such as Azad Engineering Ltd, Unimech Aerospace and Manufacturing Ltd and Data Patterns (India) Ltd have set the benchmarks in terms of valuations, but multiple PE-led platforms are likely to be created in the next 12 to 24 months," he said. "Most of these transactions are likely to be consolidated by PE platforms while strategics are focused on organic growth to fulfill customer demands and may tap public markets to raise money."