Motilal Oswal PE to invest Rs 2 bn in auto parts maker Happy Forgings

The private equity (PE) arm of financial services conglomerate Motilal Oswal will invest Rs 2 bn for a significant minority stake in Ludhiana-based auto parts maker Happy Forgings Ltd, a report in livemint.com said.

Motilal Oswal is investing in the company through its third and latest private equity fund, India Business Excellence Fund. This is the first private equity investment in Happy Forgings.

Happy Forgings will use the funds to accelerate growth and expand into new products, such as front axle beams, engine crankshafts, and oil and gas products, the report said.

Happy Forgings has a forging capacity of 60,000 metric tonnes (MT) and a machining capacity of 20,500 MT. It supplies steering knuckles, transmission gears, suspension assemblies and locomotive parts, among others, across industries such as commercial vehicles, capital equipment, tractors, railways and exports.

“We have been tracking the company for five years and started talks to buy a stake early this year. The company is founded by entrepreneurs with great experience and passion and Paritosh (Garg) has the ability to set up projects with low capital expenditure, and excels in business development and professional management,” said Vishal Tulsyan, managing director and chief executive at Motilal Oswal Private Equity (MOPE).

The fund made its close of about $130 million in September last year, Tulsyan said. It expects to achieve a final close of about $325 million, the total fund size, in the next couple of weeks, he said. The fund will make 10-12 investments.

Manufacturing has been one of the focus areas of MOPE as it is expected to benefit from strong underlying growth in the Indian economy as well as significant export opportunities, Tulsyan said.

“Commercial vehicles and the capital equipment industry would be the key beneficiaries of this trend and are expected to grow three to four times over the next decade. Considering its leading position in forging industry and strong automotive and non-automotive client base, Happy Forgings is well-positioned to capture the upcoming industry growth,” he said.

This is the fund’s third investment. In April, MOPE acquired a minority stake in incense sticks maker Cycle Pure. Last year, the PE firm invested Rs 1.35 bn in MAS Financial Services, an Ahmedabad-based non-banking financial company.

“About 75% of investments from Fund III will be focused on financial services, pharmaceuticals and the consumer sector. It will also invest selectively in industrials, such as Happy Forgings, which will consist of about 25% of total investments,” said Tulsyan.