Sona Okegawa Precision Forgings, the Rs 3,000-crore Sona Group company, is close to acquiring a forgings company in China. The deal size is pegged below euro 20 million (Rs 132 crore).
“The precision forging technology that we have complements the advantages that this Chinese company has, which is into low-cost manufacturing. We hope to conclude this deal in the next 12 months. Currently, we are in talks for placement with private equity players,” said Sona Group Chairman Dr Surinder Kapur.
The acquisition would help Sona turn the Chinese company into a manufacturing base to serve the domestic original equipment manufacturers (OEMs) there and export to those in Europe and in the US. Sona is the only company in the world possessing the knowhow to manufacture precision forgings that helps in the production of speed and bevel gears used by global automakers, said the company.
Precision forgings are far superior to cut forgings. The Sona Group currently operates a plant in the US, three in Germany and two in India.
The Chinese acquisition will add a seventh plant to the group. In addition to the proposed Chinese acquisition, Mahindra Sona, another Sona Group company that manufactures propeller shafts and automotive clutches, is scouting for acquisitions in East Germany. “We hope to meet them this week,” said Dr Kapur.
The Sona Group, which began as a technical and financial JV with Koyo Steering in 1987, in which Maruti Suzuki has about 7 per cent stake, is celebrating its 20th anniversary this year and hopes to earn Rs 4,200 crore in turnover by 2010.
In addition to its latest acquisition plans in China and in Europe, the group is setting up a second manufacturing plant in Haryana at an estimated cost of Rs 40 crore, which will provide employment to about 200 employees. “The new plant will manufacture precision forged gears and will be a second plant of Sona Okegawa. We hope to complete it in the next one year,” said Kapur.
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A rise in imports of Chinese automobile components into the country hasn’t adversely dented the profit margins of the Sona Group companies.
“While the industry faces challenges from Chinese imports, the customary products of our companies don’t suffer from these imports. Precision forged products, especially the dies, can’t be copied and our margins are superior and we have a pricing advantage,” said Kapur. The EBITDA margins for the Sona Group for FY08 were 17 per cent.