Raymond Group forays into aerospace, defence, and EV components: Is this a game changer?

Raymond Group has announced the acquisition of a 59.25% stake in Maini Precision Products Limited (MPPL) for Rs 682 crores, which will be financed through a combination of debt and internal funds. This transaction is contingent upon the necessary regulatory approvals and is anticipated to be finalised within the current fiscal year.

This strategic acquisition is aimed at enhancing Raymond’s existing engineering business by complementing it with a company that operates in burgeoning sectors such as Aerospace, Electric Vehicles, and Defence. The combined entity serves leading Global Original Equipment Manufacturers (OEMs) and Tier 1 manufacturers across aerospace, defence, automotive, and industrial industries.

This acquisition will position Raymond’s engineering business as a major player in the field, offering a wide range of precision engineering products in Engineering, Automotive, Electric Vehicles, Aerospace, and Defence. It will emerge as a significant player, uniquely positioned to tap into the high-growth market for precision engineering components, serving both international and domestic markets.

The acquisition will be executed through Ring Plus Aqua Limited (RPAL), a subsidiary of JK Files and Engineering Ltd (JK Files). Following the acquisition, Raymond will merge the businesses of JK Files, RPAL, and MPPL to establish a new subsidiary referred to as “Newco.” Raymond Ltd. will hold a 66.3% stake in this “Newco,” which will primarily focus on precision engineering products. As of FY23, the proforma consolidated revenue for “Newco” is estimated to be around Rs 1,600 crores, with an EBITDA of approximately Rs 220 crores.

Commenting on the development, Gautam Hari Singhania, Chairman, and Managing Director of Raymond Limited, said, “This acquisition will propel the growth of our Engineering business and open new avenues for our foray into rapidly growing segments like Aerospace, Defence, and Electric Vehicles (EV). The Raymond Group has always believed in the ‘Make in India’ initiative, and this acquisition will also provide impetus to the China Plus One strategy that has been benefiting us. These are growing sectors with visible momentum, presenting us with ample opportunities to leverage. I am pleased to welcome Gautam Maini, founder of MPPL, to the leadership team of our engineering business, and we will significantly benefit from his domain expertise and vast experience.”

MPPL Business Overview: 

MPPL operates in two distinct verticals with a diverse business portfolio. These two verticals encompass aerospace, involving the production of precision products for aerospace and defence applications, and automotive and industrial, which includes the manufacturing of precision components for various uses, such as clean internal combustion engines, fuel injection systems, transmissions, electric vehicle components, hydraulics, and industrial and agricultural equipment.

In FY23, MPPL demonstrated strong financial performance, with approximately 70% of its revenue coming from exports. The company reported a total revenue of around Rs 750 crores, and it achieved an EBITDA margin of 13%. This underscores MPPL’s significant contribution to precision engineering across multiple sectors.

Stock Performance: 

As the day began, the stock opened at Rs 1,831.45 per share, reflecting a 1% increase compared to the previous day’s closing price of Rs 1,814.65 per share on the BSE. At the time of writing this article, the stock is trading at Rs 1882 per share, marking a 3.7% gain from its last closing price.

The current market capitalization of the company is valued at Rs 12,522 crore. Over the past three years, the stock has delivered an impressive multibagger return of 590%. Additionally, it’s worth noting that the stock is currently trading at a 21% discount from its all-time high price of Rs 2,240 per share, which was reached on September 5, 2023.

Investors must keep this stock on their radar.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.