Sona BLW Share Price Up By 8.73%; To Acquire Escorts Kubota’s Railway Equipment Division

Sona BLW Precision Forgings Ltd (Sona Comstar) has entered into an agreement with Escorts Kubota Ltd (EKL) to acquire the Railway Equipment Division (RED) as a going concern, via a slump sale, for an enterprise value of ₹1,600 crore. 

This acquisition aligns with Sona Comstar’s vision to expand into the broader mobility sector and is expected to be earnings accretive right from the first year. This acquisition news brings Sona BLW share price into focus. 

RED, a leading supplier of critical components for the railways, including brakes and suspension systems for various rolling stocks, has a strong reputation in the industry. In FY24, RED reported revenue of approximately ₹950 crore and EBIT of ₹179 crore. The proposed acquisition offers significant growth opportunities for Sona Comstar, allowing it to broaden its clean mobility product offerings by adding a market-leading railway components business.

Commenting on the acquisition, the MD and Group CEO of Sona Comstar, Mr Vivek Vikram Singh, said, “We are delighted to step into the railways components sector with the signing of the agreement to acquire the Railway Equipment Division of EKL. The proposed acquisition of the Railway Equipment Division aligns with our vision statement as we expand into the broader mobility sector.” 

He further stated, “Once completed, the ‘Railway Equipment Division’s acquisition will enhance our clean mobility product offerings by adding a market-leading railway components business. The railway industry presents long-term growth opportunities, and with the ‘Railway Equipment Division’ business, we see significant potential to broaden our product range by incorporating advanced technology and engineered products.”

With over 60 years of experience, RED has been a long-term partner of Indian Railways and major private railway OEMs. RED is one of the few companies to have multiple products approved by Indian Railways and is the only domestic player of scale in India to have received Silver-grade International Railway Industry Standard (IRIS) certification for its brake systems.

RED operates a 6,00,000-square-foot manufacturing facility in Faridabad, in the National Capital Region, equipped to design, develop, assemble, and test a wide range of products. The division offers one of the most extensive product portfolios in the Indian railway component market, including brakes, couplers, suspension systems, and friction and rubber products. Additionally, it has a strong pipeline of new products in development, such as HVAC systems, electrical control panels, vacuum evacuation systems, and automatic plug doors. RED has demonstrated consistent growth over the last five years, with a revenue CAGR of 19% and an EBIT CAGR of 18%.

The company stated that the acquisition is subject to customary closing conditions, including the receipt of regulatory approvals. Once completed, the deal is expected to enhance Sona BLW’s presence in the railway components market and contribute significantly to its clean mobility initiatives. By entering the railway sector, Sona BLW reinforces its position as a key player in India’s mobility landscape, with RED’s extensive product portfolio and growth potential providing a solid platform for future expansion.

On October 24, 2024, Sona BLW share price opened at ₹664.00, up from its previous close of ₹644.10. At 10:04 AM, the share price of Sona BLW was trading at ₹700.30, up by 8.73%.

On the other hand, on October 24, 2024, Escorts Kubota share price opened at ₹3,595.00, down from its previous close of ₹3,701.20. At 10:07 AM, the share price of Escorts Kubota was trading at ₹3,483.75, down by 5.88%.

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.