JM Financial to sell 32% stake in Sona BLW to private equity investors

JM Financial is cashing out of automobile components giant Sona BLW Precision Forgings, by selling its 32 per cent stake to private equity (PE) investors at a profit. The deal is expected to be closed very soon. 

Sona BLW is the world’s largest manufacturer of differential gears, with a 11 per cent global share. And, it has prepared an aggressive strategy, including the doubling of market share.

It is looking to be list on the stock exchange within two years. 

The financial services company has been a more than decade-long investor in the Sona group.

The remaining portion of the shares are controlled by the promoters, the Kapur family. While the valuation of the company is not known, the annual revenue is over Rs 25 billion.  

While confirming the plan to cash out, Sunjay Kapur (pictured), managing director, told this publication: “We are the largest in differential gears in the globe and aspire to hit 20 per cent in five years. Thirty per cent of our sales are in the US, to Tier-I suppliers. We are investing Rs 600 billion to expand capacity in India and Hungry and are always open to acquisitions.” They are also mulling a joint venture in China.

Sona is also targeting the non-automotive market for gears. And, looking at medical implants, robots and turbines as areas to expand the business to other sectors.

Kapur said they were well prepared for a automobile industry shift to electric vehicles (EVs), as differential gears will also be required for the latter.

In-house research and development has already come up with an electric axle and has showcased the device for three-wheelers; it is also supplying electric differential gears abroad. Kapur says it is also ready with new designs of differential gears which might be required if EV manufacturers decide to power each wheel with a separate motor, instead of a centralised one.

Though sales in India constitute a third of their total, Sona dominates the differential gear market here — it controls 95 per cent of commercial vehicles, 

58 per cent of passenger cars and as much as 95 per cent of differential gears in off-highway vehicles. Globally, many international automobile companies depend on Sona for their differential gear requirement.

For instance, they supply the entire requirement of these to Daimler trucks, 25 per cent of the requirement of Volkswagen passenger cars and half that of Daimler. Kapur says they supply only minimal quantities in China and that is why that market is in his watch list.

In a nutshell

* JM Financial is selling 32% in Sona BLW to private equity investors at a profit

* The company is the largest player in the world in differential gears with an 11% market share. It is now aiming at increasing its share to 20% of the global market

* The firm is also looking at an IPO in the next two years

* It is investing Rs 6 billion to scale up operations