Maini Precision seeks to raise up to Rs500 cr from PE funds3 min read . Updated: 01 Aug 2016, 12:54 AM IST
Maini Precision Products likely to drop IPO plans; funds raised to be used for a new manufacturing facility and other capex to increase capacity
The Bengaluru-based Maini Precision Products Ltd is in talks to raise up to ₹ 500 crore from private equity funds and is likely to drop its planned initial public offering (IPO), two people aware of the matter said.
Maini Precision is a manufacturer and supplier of high-precision components and assemblies, catering to automotive, industrial and aerospace companies across the world. The company is a supplier to OEMs (original equipment manufacturers) such as Bosch Ltd, Eaton Corp. Plc, Stanley Black & Decker Inc. and others.
“They are in talks to raise around ₹ 400-500 crore from private equity investors. The company is already in a couple of advanced discussions," said the first person cited above, requesting anonymity as the talks are private.
ICICI Securities Ltd, one of the bankers hired to advise Maini on its IPO, is advising the company on the private fundraise, he said.
Maini Precision had filed its draft red herring prospectus with Securities and Exchange Board of India (Sebi) in September.
“The IPO will be postponed if these talks go through. The firm had received Sebi’s approval in January this year, which is valid till next January. So, they have time on hand to do the IPO if the private fundraise talks don’t fructify," said the person quoted above.
The money will be majority primary capital that the company will use to set up a new manufacturing facility and other capital expenditure to increase manufacturing capacity, he said, adding some of the funds may be used to reduce debt. “There will also be a small secondary component wherein the promoters could sell some stake to the incoming investors," he added.
Emails sent to the company and ICICI Securities on Friday remained unanswered.
Maini Precision was set up in 1973 by Sudarshan Maini and Chetan Maini. The duo set up Reva Electric Car Co. Pvt. Ltd, a joint venture with the US-based Amerigon Electric Vehicle Technologies Inc., which manufactured and launched Reva, India’s first commercial electric car. In 2010, they sold Reva Electric to Mahindra and Mahindra Ltd.
In 2014-15, Maini Precision reported a revenue of ₹ 286 crore against ₹ 258.5 crore in the previous year. The company’s profit stood at ₹ 10.5 crore in 2014-15 against ₹ 11.9 crore the previous year. Between 2011 and 2015, revenue had grown at a compounded annual growth rate of 11.6%.
Maini Precision has six manufacturing facilities and one storage facility in industrial zones in and around Bengaluru. It is in the process of setting up a new manufacturing facility in the Karnataka capital.
For the automotive and industrial sectors, the company manufactures precision components, machined castings and forgings, fuel filters and sub-assemblies used in engines, transmissions, fuel-injection systems, turbo chargers, steering columns and chassis, for passenger and commercial vehicles. On the aerospace side, it manufactures precision components and sub-assemblies used in aero structures, aero engines and aircraft systems.
During 2014-15, Maini Precision supplied 86 customers in the automotive and industrial sectors, of which 60 belonged to the passenger/commercial vehicles industry. The company had 23 customers in the aerospace sector. Maini Precision exports to countries such as Austria, Belgium, Brazil, Canada, China, France, Germany, Italy and US.
The Indian auto-component industry has witnessed significant growth in the last decade. With the government pushing to make India a major manufacturing base under “Make in India", the sector is expected to grow strongly in the future.
According to a September 2015 report by consulting firm McKinsey & Co., the Indian auto-component sector has grown three-fold to $39 billion between 2006 and 2015. In the same time, exports have grown five-fold to reach $11 billion, the report said.
The government, under the Make in India programme, has set an aggressive target of increasing the industry size to $200 billion in the next years, and increase exports to $80 billion.
According to the McKinsey report, the auto-component sector will need investments worth $85-100 billion to achieve these targets.
“In the last 18-24 months the auto components sector has shown good performance. In the domestic market, both two- and four-wheelers are expected to grow strongly going ahead. Investors will be keen on companies that don’t have a significant exposure to UK and Europe," said Munish Aggarwal, director at investment banking firm Equirus Capital.