m&m auto case study m&a – synergies 5th sept-08. v. s... · engineering design styling...
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M&M Auto Case Study
M&A – Synergies
5th Sept-08
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Environment continues to remain favorable
Partnering
$20Bn * $20Bn *2015India
Advantage Suppliers driving
i tiLCC
Addressability500 Bn
Partnering across
verticalsIncreasing
Vendor
innovation
Vendorrationalisation
Autocompcontribution to India
N. American suppliers
under severe pressure
Auto industryshare of India’s
3.5 mn jobs by ’155% of GDP by ‘15
p essu eGDP: from 5% to
10% by 2015
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2Source : ACMA, SIAM, BCG Research
Mission StatementT t I di ’ t V l bl I tiTo create India’s most Valuable, Innovative,
“Art to Part” auto component entity
that partners with its global customers
to meet & surpass their business needs
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ConceptionM&M
Automotive Farm Equipment SYSTECH
Engineering Design
Styling
Engineering Design
Styling MES
Assembly
Testing
M k ti / S l
Assembly
Testing
M k ti / S lMarketing / Sales
Gear Manufacturing
Marketing / Sales
Gear Manufacturing
Purchasing Purchasing
Transmission / Axle
Sheet Metal Stamping
F d
Transmission / Axle
Sheet Metal Stamping
F d
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Foundry Foundry
AdolescenceM&M
Automotive Farm Equipment SYSTECHEngineering Design
Styling
Engineering Design
Styling MESAssembly/Mfg
Engine/transmission
Marketing / Sales
Assembly/Mfg
Engine/transmission
Marketing / SalesSSBUSSBU
Marketing / Sales
Purchasing
Gear Manufacturing
Marketing / Sales
Purchasing
Gear Manufacturing
Drive Train / Axle
Sheet Metal Stamping
Foundry
Drive Train / Axle
Sheet Metal Stamping
Foundry
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Foundry Foundry
Growing upM&M
Automotive Farm Equipment SYSTECH
Styling Styling
SSBUEngineering Design Engineering Design
Assembly
Testing
Marketing / Sales
Assembly
Testing
Marketing / Sales
MES
Marketing / Sales
Gear Manufacturing
Marketing / Sales
Gear Manufacturing
Purchasing PurchasingACBU
Gear Manufacturing
Transmission / Axle
Sheet Metal Stamping
F d
Transmission / Axle
Sheet Metal Stamping
F d
Forging
Sheet Metal Stamping
Foundry
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Foundry Foundry Foundry
Forgings: Global Strategy
EUROPE
Market ExpansionCHINAUSA/Canada
Import Technology/SkillProduct portfolio
expansionMarket Expansion
Future GrowthMarket
Market Expansion
INDIA
PH. I (2005-06): Build Capacity
INDIA
Low-cost base Capacity
PH II (2006 07) B ild C bilit
PH. III (2007 - ): Build Global Co
PH. II (2006-07): Build CapabilityWorld-class quality SCM
capabilities/Brand build-up
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M&A geared to fill strategic gaps
M&A Criteria Companies
i Technology
i Market Access
i Amforge, India
i Stokes Forgings, UKi Market Access
i Quality of Management
L ti E
i Schoeneweiss Forgings,
Germanyi Location: Europe
i Complementary
d t tf li
i Jeco Holdings, Germany
i Precision Engineering, product portfolio
India
i Hinoday, India
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M&A Strategy…we have acquired companies of pedigree
Plant Year Established
F lk th 1829Falkenroth 1829
Schoeneweiss 1866
Jeco 1885Jeco 1885
GSA 1891
Stokes 1908
Note: Falkenroth, Jeco & GSA are plants of Jeco Holdings
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Mahindra Forgings - GlobalForgings : Evolution
• Mahindra ForgingsEurope formed
2nd 4000T & 6000T press at
ChakanOrganic
Acquired
p• Machining at Stokes• China MOU• S Africa term sheet
• 1st 4000T press1st Steering
Growth
Inorganic
Growth
Both
Acquired Crankshaft hi i
Schoeneweiss1st 4000T pressat Chakan
• New m/c shopat Jeco
1st Steeringknuckle
machine line2nd steering
knucklemachining
li
Acquired JecoAcquired
Both
qAmforge
StokesAcquired
machining line
Vauxhall machining line
lineq
Amforge
Q407
Q108
Q208
Q308
Q408
machining line acquired
Q206
Q306
Q107
Q207
Q307
07
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06
06
Forgings : Enabling structure
MFL SCH JECO STOKES
M&M
MFLM&M: 47%
Others: 53%M&M: 100% M&M: 67%
Scholz: 33%M&M: 100%
SCH JECO STOKES
M&M: 60%
M&M
M&M: 60%Others: 40%
SCH JECO STOKES
MFL
MFL: 100% MFL: 100% MFL: 100%
SCH JECO STOKES
N t MFL h ld J &S h i th h M iti h ldi i
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Note: MFL holds Jeco &Schoeneweiss through Mauritius holding companies
Mahindra Forgings: Among the five largest globallyLeague of the Largest Global Forging Companies
Company, HQRevenue
($ Mn) FY07/CY06
1,419Thyssen, Germany
Bharat Forge (BFL), India 923
Sumitomo, Japan
Hirschvogel, Germany
792
594
Amtek, India
g , y
MFL, India F 08
~401
648
Amtek, India
Aichi, Japan
Dongfeng China
370
91
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Dongfeng, China 91
Source : M&M Research
Opportunity to Create ValueA f M h 26 2008
Company Market Cap (Rs cr) P/E Ratio
As of March 26, 2008
MICO 11850 20
Bharat Forge 6100 24
E id 5450 24Exide 5450 24
Motherson 3500 27
Mahindra Forgings* Avg: 1600 Avg: 13High: 2600 High: 20Low: 1000 Low: 8Mahindra Forgings Avg: 1600 Avg: 13
Amtek 951 7
Sundaram Fasteners 675 9.5
High: 2600 High: 20Low: 1000 Low: 8
Rico 350 15
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* Institutional investors have continued to increase holdings in Mahindra Forgings
The scale achieved is an advantage
OperatingMargin Large
20
g(%)
gCompany Set
TOTAL
18
19
17
18
16
SmallCompany Set
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FY 03 FY 04 FY 05 FY 06 FY 0715
Source : Edelweiss Report on Indian Auto Component Industry
Starting Out……Getting There.
MSATSYSTECH
SSBU ACBU MES
MESSTEEL COMPOSITESSTEEL COMPOSITES MESMES+ Acqn
$ 10 Million
STEELMUSCO
$ 120 Million
COMPOSITESSiroplast + Acqn
$ 5 Million
STEEL
$ 177 Million
COMPOSITES
$ 8 Million $ 33 Million
MES
Foundry Unit+ Acqn
$ 0
Sheet MetalKanhe, PSSL, Rudrapur
$ 30 Million
Forging + Acqn, Amforge, UK, Forge, Vauxhall, m/c
$ 40 Million
CASTINGS
$ 65 Million
STAMPINGS
$ 46 Million
FORGINGS
$ 564 MillionFY07 :$215
$910Million
Gear UnitSAR Auto + Acqn
$ 10 Million
GEARS
$ 17 Million
Mn
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Systech: among the largest Indian auto comp groups within a few years
Indian Companies
Company FY08 Revenue(Rs Cr.) Comment
4,806Bharat Forge Enviable track record
3,763
4,678
Amtek
MICO ,
3,644
3,372Tata Autocomp
Sundaram Fasteners
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1,654Sundaram Fasteners
Walking the talk : our cutting edges
•Fifth largest forgings company in the world
•Engineering services is growing rapidly
•Poised to recreate the forgings story in gears
•Other growth areas: castings, stampings, aerospace, steel p ,
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Mahindra Forgings : Vision
• Top 2 in India - 2010• Top 5 Globally - 2015Leadership
• Multi locational presence + India/China as low cost base• Diverse customer baseGlobal• International management talent
D i t th h tti d t h l
Global
• Dominate through cutting edge technology• Adoption of best processes & systemsInnovation
• Value added products for higher margins• International price with LCC costFinancial
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