Taking charge of the merged entity Sona Comstar as chairman, Sunjay Kapur spoke to Mint about the intent of bringing Sona BLW Precision Forging Ltd and Comstar Automotive Technologies Ltd together with help of the world’s largest private equity firm Blackstone, mid-term goals and joint technology roadmap for future growth. Excerpts from the interview:
What is the intent behind bringing Sona and Comstar together?
Given the speed with which technology disruptions are happening within the automotive industry, the focus behind this new entity is to remain relevant, for example for electric vehicles. We (Sona BLW Precision Forgings Ltd) have gone from being a bevel gear manufacturer to a differential (gear) manufacturer.
At Sona BLW, we are assembling the entire differential unit. We command 12% market share globally in this space. We own the technology (bevel gear manufacturing). So we are sitting on a strong business which is almost debt free.
We have now forayed into the EV space. Next year we will manufacture close to 1.25 million differentials in India for EVs, predominantly for the passenger cars. 95% of these would be for the export markets.
In the past we have also supplied electric axles to the three-wheeler industry wherein until now we have been buying the motor from a third party. However, with Comstar, which makes world’s lightest starter motors for ICE and hybrid engines, our endeavour is to develop our own motor so that we can build our own axle entirely in-house and see how to scale up that product.
Comstar was a Visteon spinoff wherein majority of their supply would go to Ford (Motor Company). 85-90% of their business comes from exports. Fortunately, we have only one common customer, which is Tata Motors. This gives us an opportunity to penetrate into each other’s customer portfolio.
So with bevel gears, we are present in passenger cars, CVs and off-highway vehicles including farm and construction equipment. With Comstar’s starter motors, we will consolidate in the passenger car segment.
What is Sona Comstar’s mid-term target?
Combined, we are a $510 million entity today. We plan to achieve $1 billion by 2024. This is going to be organic as well as inorganic. We will keep looking out for other companies that we can acquire in the Indian market space. We would like to continue growing our India footprint.
From Blackstone’s perspective, I think this is a good automotive platform. They had bought Comstar last year. When they came to Sona BLW, we merged the two entities so that we can create Sona Comstar, which becomes the platform that will continue to grow and expand in this space from a manufacturing perspective.
Have you identified what areas will you look at to make new acquisitions?
We haven’t identified technology areas as yet for making new acquisitions. That said, we may not look at acquiring an engine component manufacturer. However, we may look at unique technologies, electric vehicles and we will look at the Indian market with respect to further enhancing our manufacturing footprint.
How has the addition of Comstar added to the overall valuation of the existing business?
So JM Financial exited very recently and that’s when Blackstone came in. I would say that we have grown from $400 million to $510 million with the addition of Comstar. The revenue growth at Sona BLW has remained consistent over years. Over a period of time we have grown to become $400 million. With the addition of Comstar, it is another $100-110 million, so that’s where our revenues are coming from.
How much stake do you have in Sona Comstar?
Our stake in Comstar is 35%, while Blackstone holds 65%.
How much has Blackstone invested in Sona Comstar?
We are a private firm and we are keeping that information confidential.
What the Sona Comstar joint technology roadmap entails?
We are thinking of developing electric drive units (EDU) in the future. Today, we are already making differentials for the electric cars. We are developing products for supply to EV makers in Germany as well. We will supply bevel gears and other planetary gears to EV manufacturers.