Sintex Industries has announced the acquisition of 100 percent equity in SIMONIN Group, a manufacturer of metal and plastic sub-assemblies and technical components in France.
The French company's acquisition has been done from a strategic perspective to widen company's product offerings adding new and prestigious client base, says Sunil Kanojia, Group CEO, Sintex in an interview with CNBC-TV18.
In 2013, SIMONIN's revenue stood at 48 million euros while its EBITDA margin stood at 8 percent. Kanojia believes this acquisition will be value-accretive for company's moulding business.
Below is the edited transcript of the interview:
Q: How much would SIMONIN really contribute to your revenue stream since we understand that it may not be too significant?
A: The reason for acquisition was largely not necessary from the size that it will contribute but more from the capability that it has. It was bringing many new customers as well as the capability. So far, we were into plastic moulding but this company gives us advantage that we will have metal stamping as well as plastic moulding on metals, especially on the precession part. If you are asking specifically how much it will contribute, it did 48 million euro in the last year with 8 percent EBITDA and grew by 10 percent. Therefore, we expect it to grow by another 8-10 percent next year also, so that would be a turnover. In my opinion, that is not small, it is a big turnover.
Q: Can you repeat what its last revenues were and what was the growth percentage?
A: It did 48 percent at a growth of 10 percent with an EBITDA of 8 percent.
Q: What exactly was the total sale?
A: Forty-seven point something million euro.
Q: When you say that it has products like plastic moulding on metals, will it mean that we would see a product diversification and expansion in India as well since you have this new product from your foreign purchase?
A: Yes, you can consider that because when you supply products to people like Schneider, Valio, you supply to their supplier who will buy plastic components and do over moulding and then supply to the OEMs. In this case, you can supply directly to customers like Valio, Vignal Systems, SKF; for lighting, you have metal as well as plastic moulding. Then there are wirings where wiring harness and some of the wiring products, very precision products like spring which are quoted with plastic to avoid any kind of corrosion to happen.
There are several products where you have metal to provide the strength and plastics to provide electrical insulation and this is a trend where you get access to large customers as well as better capability and then you draw leverages across several customers, across geographies in different plants. Therefore, you will spread it across in different plants of plastic and bring it to India as well because we have a precision plant here, where we are supplying to Schneider, so this technology will be deployed back in India where we will get more access to new customers. Therefore, we are looking forward to the new set of customers then leveraging to old customers with new products as well as bringing it back to India.
Q: What kind of margins does this company enjoy and you said 10 percent growth in revenues but what about the pickup in margins, how much could we expect?
A: They did 8 percent. We will assume that they will do 8 percent on standalone basis but the moment you start doing the integration, for example, they have a plant in Morocco and we also have a plant in Morocco, which is a rented premise. We will try to take the assets off from the rented premises soon and put it in the premises of new company which has its own property. Therefore, automatically we get advantage of the rentals that we are paying for the Morocco plant. France is a small country and we have plants all across, so we will try to see that some of these plants can be integrated into one premise and then we do not have to pay cost of certain central resources, utilities etc on multiple plant but we will try to reduce the number of plants that we have in France.
Q: What do you expect your overall consolidated sales growth to be for Sintex with this acquisition in FY16? Will there be a quantum leap in FY17?
A: It should and it is not necessary to look at the revenue but the expansion of margins. In custom moulding business you draw leverages and expand your margins, for example, Nief is doing about 9.5 percent now and we are hoping that it should jump to about 11 percent or so in near future. It once did 11 percent but because of the two acquisitions that we made in the past, the margins again went down but those acquisitions will help to expand the margin further.
Q: Are you done with widening your product offering or are there any more strategic acquisitions on the cards?
A: As Sintex, we haven't been actively pursuing any acquisition. However, subsidiaries are left to keep on expanding their footprint either geographically or to acquire new customers or capabilities. Sintex doesn't provide any help to them but they have their own resources and they do this acquisition and expand their business.
