M&M Auto Case Study
M&A – Synergies
5th Sept-08
1
Mergers & Acquisitions
In-house Investment Banking Solutions
Environment continues to remain favorable
$20Bn * $20Bn *2015
India
Advantage
Suppliers
driving
i
innovation
ti
LCC
Addressability
500 Bn
Auto industry
share of India’s
GDP: from 5% to
10% by 2015
N. American
suppliers
under severe
pressure
p
essu e
Source : ACMA, SIAM, BCG Research
Partnering
across
verticals
Increasing
Vendor
rationalisation
Autocomp
contribution to India
3.5 mn jobs by ’15
5% of GDP by ‘15
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Mission Statement
T create
To
t IIndia’s
di ’ mostt V
Valuable,
l bl IInnovative,
ti
“Art to Part” auto component entity
that partners with its global customers
to meet & surpass their business needs
3
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The Vision
2010
X
$1Bn
X
$1Bn
4
Mergers & Acquisitions
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Conception
M&M
Automotive
Farm Equipment
Engineering Design
Engineering Design
Styling
Styling
Assembly
Assembly
Testing
Testing
M k ti / SSales
Marketing
l
M k ti / SSales
Marketing
l
Purchasing
Purchasing
Gear Manufacturing
Gear Manufacturing
Transmission / Axle
Transmission / Axle
Sheet Metal Stamping
Sheet Metal Stamping
F
Foundry
d
F
Foundry
d
SYSTECH
MES
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Adolescence
M&M
Automotive
Farm Equipment
Engineering Design
Engineering Design
Styling
Styling
Assembly/Mfg
Assembly/Mfg
Engine/transmission
Engine/transmission
Marketing / Sales
Marketing / Sales
Purchasing
Purchasing
Gear Manufacturing
Gear Manufacturing
Drive Train / Axle
Drive Train / Axle
Sheet Metal Stamping
Sheet Metal Stamping
Foundry
Foundry
SYSTECH
MES
6
SSBU
Mergers & Acquisitions
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Growing up
M&M
Automotive
Farm Equipment
SYSTECH
SSBU
Engineering Design
Engineering Design
Styling
Styling
Assembly
Assembly
Testing
Testing
Marketing / Sales
Marketing / Sales
Purchasing
Purchasing
Gear Manufacturing
Gear Manufacturing
Gear Manufacturing
Transmission / Axle
Transmission / Axle
Forging
Sheet Metal Stamping
Sheet Metal Stamping
Sheet Metal Stamping
F
Foundry
d
F
Foundry
d
Foundry
7
MES
ACBU
Mergers & Acquisitions
In-house Investment Banking Solutions
Forgings: Global Strategy
USA/Canada
Market Expansion
Import Technology/Skill
Product portfolio
EUROPE
expansion
CHINA
Market Expansion
Future Growth
Market
INDIA
Low-cost base Capacity
PH. I (2005-06):
Build Capacity
PH II (2006
PH.
(2006-07):
07) Build
B ild Capability
C
bilit
World-class quality SCM
capabilities/Brand build-up
PH. III (2007 - ): Build Global Co
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Mergers & Acquisitions
In-house Investment Banking Solutions
M&A geared to fill strategic gaps
Companies
M&A Criteria
i Amforge, India
i Technology
i Stokes Forgings, UK
i Market Access
i Schoeneweiss Forgings,
i Quality of Management
Germany
i Location:
L
ti
E
Europe
i Jeco Holdings, Germany
i Complementary
i Precision Engineering,
product
d t portfolio
tf li
India
i Hinoday, India
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M&A Strategy…we have acquired companies of pedigree
Plant
Year Established
F lk
Falkenroth
th
1829
Schoeneweiss
1866
Jeco
1885
GSA
1891
Stokes
1908
Note: Falkenroth, Jeco & GSA are plants of Jeco Holdings
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Forgings : Evolution
Mahindra Forgings - Global
• Mahindra Forgings
p formed
Europe
• Machining at Stokes
• China MOU
• S Africa term sheet
Organic
Growth
Inorganic
Growth
Both
Acquired
q
Amforge
Vauxhall
machining line
acquired
Q2
06
Q1
06
Acquired
Schoeneweiss
1st Steering
knuckle
machine line
Stokes
Acquired
Q3
06
Q1
07
• 1st 4000T press
at Chakan
• New m/c shop
2nd steering
at Jeco
knuckle
machining
li
line
Acquired
Jeco
Crankshaft
machining
hi i
line
Q2
07
2nd 4000T &
6000T press at
Chakan
Q3
07
Q4
07
Grow Peak to Peak
11
Q1
08
Q2
08
Q3
08
Q4
08
Mergers & Acquisitions
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Forgings : Enabling structure
M&M
MFL
SCH
JECO
STOKES
M&M: 47%
Others: 53%
M&M: 100%
M&M: 67%
Scholz: 33%
M&M: 100%
M&M
MFL
SCH
MFL: 100%
JECO
MFL: 100%
M&M: 60%
Others: 40%
STOKES
MFL: 100%
N t MFL h
Note:
holds
ld Jeco
J
&S
&Schoeneweiss
h
i th
through
hM
Mauritius
iti h
holding
ldi companies
i
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Mahindra Forgings: Among the five largest globally
League of the Largest Global Forging Companies
Revenue
($ Mn) FY07/CY06
Company, HQ
Thyssen, Germany
1,419
Bharat Forge (BFL), India
923
Sumitomo, Japan
792
Hirschvogel,
g , Germany
y
594
MFL, India F 08
648
Amtek, India
~401
Aichi, Japan
370
Dongfeng China
Dongfeng,
13
91
Mergers & Acquisitions
In-house Investment Banking Solutions
Source : M&M Research
Opportunity to Create Value
A off M
As
March
h 26
26, 2008
Company
Market Cap (Rs cr)
P/E Ratio
MICO
11850
20
Bharat Forge
6100
24
E id
Exide
5450
24
Motherson
3500
27
High:
2600
Low:1600
1000
Avg:
Low:13
8
High:
20
Avg:
Amtek
951
7
Sundaram Fasteners
675
9.5
Rico
350
15
Mahindra Forgings
Forgings*
* Institutional investors have continued to increase holdings in Mahindra Forgings
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The scale achieved is an advantage
Operating
Margin
g
(%)
20
Large
g
Company Set
TOTAL
19
18
17
Small
Company Set
16
15
FY 03
FY 04
FY 05
15
Source : Edelweiss Report on Indian Auto Component Industry
FY 06
FY 07
Mergers & Acquisitions
In-house Investment Banking Solutions
…Getting
Starting There.
Out…
SYSTECH
MSAT
SSBU
ACBU
STEEL
STEEL
COMPOSITES
COMPOSITES
MUSCO
$$ 177
120 Million
Million
Siroplast + Acqn
$$ 85 Million
Million
Foundry Unit
CASTINGS
+ Acqn
$ 65 Million
$0
MES
MES
MES
+ Acqn
$$ 33
10 Million
Million
Forging
FORGINGS
+ Acqn, Amforge, UK,
Sheet Metal
STAMPINGS
Kanhe, PSSL, Rudrapur
Forge,Vauxhall, m/c
$$ 46
30 Million
Million
$$564
40 Million
Million
Gear Unit
GEARS
SAR Auto + Acqn
10 Million
Million
$$ 17
16
FY07
:$215
Mn
$910
Million
Mergers & Acquisitions
In-house Investment Banking Solutions
Our ‘marquee’ customers
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Mergers & Acquisitions
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Systech: among the largest Indian auto comp
groups within a few years
Indian Companies
FY08 Revenue
Company
(Rs Cr.)
Bharat Forge
4,806
Amtek
3,763
MICO
,
4,678
Comment
Enviable track record
3,644
Tata Autocomp
3,372
Sundaram Fasteners
1,654
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Walking the talk : our cutting edges
•Fifth largest forgings company in the world
•Engineering services is growing rapidly
•Poised to recreate the forgings story in gears
•Other growth areas: castings, stampings,
p
, steel
aerospace,
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Mahindra Forgings : Vision
Leadership
Global
Innovation
Financial
• Top 2 in India - 2010
• Top 5 Globally - 2015
• Multi locational presence + India/China as low cost base
• Diverse customer base
• International management talent
• Dominate
D
i t through
th
h cutting
tti
edge
d
technology
t h l
• Adoption of best processes & systems
• Value added products for higher margins
• International price with LCC cost
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THANK YOU
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