MUMBAI: Aurangabad-based Varroc Engineering is in advanced talks with Sintex Plastic Technology to acquire the latter’s domestic automotive custom moulding business, according to several people familiar with the development.
Sintex Plastic, which makes plastic products for automotive and household items, is looking to sell its domestic automotive custom moulding business as part of a plan to pare its debt and focus on its core business. The company has also put its overseas automotive custom moulding business on the block, the persons cited earlier told ET, requesting not to be named.
The company had exploratory talks with several Indian auto ancillary companies before going ahead with Varroc Engineering, they said, adding that if a deal is struck, it may fetch Sintex Plastic anywhere between Rs 350 crore and Rs 500 crore.
ET’s email query to a spokesperson of Sintex Plastic remained unanswered till as of press time.
Tarang Jain, managing director of Varroc Engineering, said the company is always open to acquisition opportunities, but there is nothing on the table right now. “At any given point in time, we are on the lookout for both organic and inorganic opportunities, which can help us grow. But there is nothing to be announced at this point in time,” Jain told ET.
According to the people cited earlier, the company may be able at generate an additional Rs 1,500–2,000 crore by selling Sintex NP, its France-headquartered step-down subsidiary which is also on the block.
Sintex Plastic had a debt of Rs 3,606 crore on its books at the end of September 2018 compared with Rs 3,665 crore at end FY18, according to data available on the BSE website.
In the first nine months of FY19, the company’s revenue fell by 16% to Rs 3,645 crore, while interest expenses rose 13.2% to Rs 242.2 crore. This was one of the key reason why the company’s profit fell 45% to Rs 104 crore in the nine months of FY19.
Sintex Plastic’s custom moulding business comes under its subsidiary Sintex BAPL, while the rest of the revenue is generated from the prefab segment though Sintex Prefab and Infra.
In the company’s nine-month revenue, 80.3% came from the custom moulding business and balance from prefab.
The custom moulding business has two divisions—an industrial segment where it supplies polymer products for automotive companies, and a retail business where it manufactures water storage solution. The company facilitates transformation of conventional metal and alloys used in the automotive sector into polymeric material and composites. This helps automakers reduce vehicle weight without compromising on strength or efficiency and leads to greater fuel efficiency.
Sintex has secured business from Tata Motors for timing cover, engine cover and roof rail. It has also secured won business from Hyundai Motors for design, development and supplies for existing platforms. In the two-wheeler segment, the company was able to increase its share of business with the TVS Group by ensuring parts supply for scooters and motorcycles.
It is this automotive order book which seemed complementary to Varroc Engineering’s existing business, which could supplement the Aurangabad-based company, sources said.
Sintex BAPL has global presence through its step-down international subsidiaries, namely Sintex NP SAS (Europe), Sintex Wausaukee Composites Inc. (US) and Sintex Logistics.