Sunjay Kapur steers Sona to new shores

Exit from Sona Steering and consolidation in forging business are aimed at gaining global footprint

Surinder Kapur was a product of the Japanese wave of the 1980s. The then Indian government, led by Rajiv Gandhi, had taken the first steps towards liberalisation by allowing in Japanese automobile makers. These companies decided to source components locally in order to keep their price tags low. 

Sensing an opportunity, Kapur, who had started out in his father-in-law Raunaq Singh’s Bharat Gears, met the bosses of Maruti Udyog, in which Suzuki of Japan had taken a stake, V Krishnamurthy and RC Bhargava, who told him he could choose whatever he wanted to make so long as he would let Suzuki buy 26 per cent in his venture. Kapur chose to make steering systems and gave just 10 per cent equity in his company, Sona Steering, to Suzuki. It was renamed Sona Koyo after Koyo of Japan acquired a stake in the mid-1990s.

Kapur spent most of his life building the steering business. Sona Koyo, which was listed on the stock market, was the face of his Sona group — he came from a family of jewellers, hence the name Sona (gold). It also happened to be the leading steering system manufacturer in India.

Kapur passed away in July 2015. Sunjay, Kapur’s son, who took over the reins of the group, decided to exit the 30-year-old company by selling his 25 per cent stake for Rs 419 crore to Koyo, now known as JTEKT Corp, in January. The Japanese company will acquire another 26 per cent, taking its stake to 71 per cent.

The exit from the steering business was followed by another move. With money in hand, Sunjay decided to buy out Mitsubishi Materials Corporation’s 25 per cent stake in the forging business of the group in February. The other companies in the group include Mahindra Sona, Sona Stampings, and Sona BLW Präzisionsschmiede. 

Sunjay does not share the financials of the latest deal. While he would have spent a large portion of the Rs 419 crore he got from JTEKT to shore up his stake in Sona BLW, he says there is money left even after the deal. 

Sona BLW, with revenues of Rs 2,400 crore (mostly from exports and overseas operations), has seven units in India, Germany and Hungary.

 

The journey so far

January 1985: Enters into a technical agreement with Koyo for manual steering gear and column

February 1986: Sona Steering, a JV, is formed with Maruti Udyog
October 1987: Sona Steering lists through an IPO

August 1993: Sona Somic Lemforder Components is set up
October 1993: Koyo invests in Sona Steering; company is renamed Sona Koyo

September 1994: Mahindra Sona is founded

March 1995: Mahindra Sona acquires automotive components units of M&M

July 1995: Enters into technical collaboration with Koyo for power steering
May 1997: Koyo increases stake in Sona Koyo to 20.5 per cent

November 2007: Four joint ventures are formed with JTEKT Sona Automotive India: Sona
Fuji, AAM Sona, Axle Private, Arjan Stampings

February 2008: Sona BLW Präzisionsschmiede is formed

January 2017: Exists Sona Koyo by selling stake to Koyo

February 2017: Shores up stake in Sona BLW by buying Mitsubishi Materials
Corporation’s 25 per cent stake in the company 

Many in the industry were surprised at these sudden developments. “Japanese joint venture partners have been here for long. Many are keen to take control. So, Sunjay has decided to exit from one and focus on the industry it controls,” Jagdish Khattar, former managing director of Maruti Suzuki and now the promoter of Carnation, a network of service stations, says.

Sunjay has his arguments ready. He says Sona Koyo did not own the technology of steering systems and the operations were limited to the Indian market. “Our forging business is global and has a lot of potential. JTEKT being the owner of steering technology is best positioned to manage that business. We felt it was best to divest when the market was good and business was healthy,” he says.

Sona BLW, on the other hand, owns the forging technology it uses, which will allow it to grow quickly in the future. “We own the technology and there are no partners here. We need to do everything on our own. We’ve got global growth aspirations,” he says.

According to Sunjay, there is a huge opportunity for forgings in the US, a market it currently services from India and Germany. “It gives us an opportunity that steering systems cannot. We want to invest time, money and energy in areas where we have global opportunities”.

The goal is to expand the forging business in India from Rs 500 crore today to Rs 2,000 crore in the next four to five years. “Customer demand is changing in terms of technology. We will set up a tech centre in Europe to expand our R&D. We have started supplying to electric vehicles. We would like to invest in more products,” adds Sunjay. For this, he is prepared to invest Rs 300-400 crore over the next two to three years.

Better margins

Sona Koyo is a direct supplier to automobile makers and its operations involve a lot of assemblies. Sona BLW supplies forgings to vendors who use them to make assemblies for the automobile makers. However, the profit margin in forgings is higher than in steering systems. “In steering, we had 12 per cent margins, but it is almost double for our forging business. We supply components that require minimum machining. It is therefore more cost effective and has more strength,” says Sunjay.

Some in the industry say that Surinder Kapur may not have agreed to the sale of the steering business. But Sunjay differs. “I am sure he would have agreed. The founder (Kapur) had passion for the gears as well as the steering business. I love the steering business as I ran it for years, but we did not own the technology,” he says.

A Delhi-based component manufacturer says the Japanese partner in the steering business had mostly dealt with the senior Kapur who actively looked after the business all his life. “After Kapur’s sudden demise in 2015, I understand the Japanese were keen to have complete control over the business,” he says, declining to be quoted.

Sona BLW will no longer be a publicly traded company and that allows Sunjay greater flexibility in operations. But he does not rule out going for an initial public offer in the days to come. “I am sure every company that grows also aspires to list. We will look at it.” The company has an existing private equity investor, JM Financial.

The late Kapur had seen a challenge after the acquisition of BLW, a company ten times the size of the acquirer, Sona Okegawa. The business was driven to the brink of insolvency. Kapur shifted to Germany, took charge of the situation by liquidating inventories, working closely with buyers, and negotiated salary cuts with employees. He was able to turn the company around eventually.
 

During that time, Sunjay oversaw the Indian business. Now it is his turn to go global. “This makes my life all the more challenging. But it will be fun,” says Sunjay.

Sona BLW, with revenues of Rs 2,400 crore (mostly from exports and overseas operations), has seven units in India, Germany and Hungary.