Piramal Finance Limited, a subsidiary of Ajay Piramal-controlled Piramal Enterprises Limited (PEL), has expanded its investment focus to auto component space by committing Rs 565 crore in two companies – RSB Group & Indoshell Mould Limited.
The company has invested Rs 275 crores and Rs 290 crores in RSB Group and Indoshell Mould, respectively. The investments were made through the corporate finance group (CFG), erstwhile structured finance group, of Piramal Finance Limited.
The CFG has diversified over time both in terms of sector and offerings. CFG is now sector agnostic and offers capital across the risk curve including senior debt, acquisition finance, promoter finance, private equity exits alongside its previous focus on mezzanine investments. It started with focus on infrastructure which includes roads and renewables but over the last two years has funded corporates across cement, entertainment, security management, packaging, etc. CFG typically targets borrowers who face constraints from traditional channels owing to the current stress in the banking system.
Khushru Jijina, managing director, Piramal Finance Limited, said, “The auto component space has been on our radar as a focus area for a while now. As is standard practise across our platform, we committed to an in depth study of the sector over the past few quarters which, has culminated in announcing these first two transactions. The industry has grown at a 15 percent CAGR over the last decade, which is significantly higher than the OEMs themselves. Both RSB and Indoshell have long standing relationships with major OEMs and command higher wallet share of their respective customer set. We look forward to more such transactions as we further scale up our investment focus towards this sector.”
RSB manufactures auto engineering products such as propeller shafts, gears, axles & machined products for engine components and construction equipment aggregates. It has strong domestic presence with 11 manufacturing facilities spread across major auto clusters and caters to all the major OEMs in the commercial vehicles, passenger cars, construction and farm equipment. The company, which today has a turnover of almost Rs 1,200 crore, also has strong backward integrated facilities with in house forging and casting facility.
“We are pleased to have partnered with an organisation of such repute as being a funder of choice in the market today. This investment has provided us with a long-term solution to our capital requirements. Going forward, we believe the auto component demand would be fuelled by stable government framework and increasing economic activity,” said RK Behera, chairman & managing director, RSB Group.
Indo Shell, a two-wheeler focussed precision cast supplier, is a key vendor of engine cylinder blocks to Hero, Honda and TVS. Apart from two-wheelers, the company is well diversified across other segments – namely, hydraulics for construction equipment and transmission components for commercial vehicles.
Commenting on Piramal Finance funding, Balaji Jagadeesan, managing director, Indo Shell Mould, said, “This tranche of funding from the Piramal Group has helped us solve a cash flow mismatch situation and further enables us to meet the incremental demand from two wheeler OEMs. In addition, we are now well placed to cater to our export clients in the commercial vehicle segment through our new state-of-the-art export oriented facility situated near Coimbatore.”