Mumbai: Kirloskar Oil Engines Ltd said it has executed a definitive agreement to buy a majority stake in La-Gajjar Machineries (LGM), the maker of Varuna and Raindrop brands of electric pumps.

Kirloskar will acquire a 76% stake in the company at a valuation of 7.89 times earnings before interest, taxes, depreciation and amortization. The balance will be acquired over the next five years, the company said in a statement Wednesday.

Kirloskar Oil Engines makes diesel engines, gensets and pumpsets.

“LGM provides Kirloskar a strong and established footprint into the electric pump market through its Varuna and Raindrop brand of submersible and mono-block pumps and further consolidates on Kirloskar’s strong position in the diesel and electric pump segment," the statement said.

LGM, which enjoys market leadership in states like Uttar Pradesh and Odisha, is among the top five pump makers in another 12 states, according to the statement.

Its manufacturing units are located in Ahmedabad. For the year ended 31 March 2017, LGM reported revenue of about Rs400 crore. The shareholders and management team of LGM will continue to be involved in the business.

“Through this acquisition we believe that we will be able to ... utilize this huge network to deliver value for all stakeholders," said Nihal Kulkarni, managing director at Kirloskar Oil Engines Ltd.

Consulting firm EY was the sole financial adviser to LGM for the transaction.

Shares of Kirloskar Oil Engines Ltd closed the day at Rs409.35 per share, up by 5.78%, on the BSE, while the benchmark Sensex closed almost flat at 31,283.64 points.

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