Raymond plans stake sale in engg arm, eyes Rs 300 cr

Raymond Limited, the Rs 4,000-crore textiles major, plans to offload a minority stake in its engineering subsidiary, JK Files, one of the largest producers of files in the world, with a 30 per cent global market share in cutting and precision tools business.

According to people in the know, Avendus Capital has been appointed to find a suitable investor. Raymond is trying to attract private equity or strategic investors to raise Rs 250-300 crore. Raymond will use proceeds from the stake sale to fund global buyouts, as well as expanding its manufacturing facilities. JK Files has reported gross revenue of Rs 415 crore for 2012-13.

When contacted, a Raymond spokesperson, said: “We do not comment on market speculation.” An Avendus Capital spokesperson refused to comment.

JK Files, established as a division of Raymond in 1949, earns 60 per cent of its revenue from exports, in 70 countries worldwide. The company has launched a range of products in hand tools and the agricultural implements industry recently. In 2005, Raymond’s engineering division had entered the the automobile industry by acquiring starter gears and shaft bearings maker Ring Plus Aqua.

JK Files has four plants in India — Ratnagiri, Chiplun, Pithampur and Kolkata — and one plant in Indonesia. JK Files’ products include files, power tools, hand tools (screw driver, hammers and spanners), drills, taps and solid carbide. Raymond’s engineering division’s client list includes General Motors, Fiat, Caterpillar and Tata Motors.

Despite the slowdown, engineering is still attracting investors. Sapna Seth of boutique bank Singhi Advisors said, “This sustained long-term growth in India is the basic driver for the interest shown by global engineering industry and PE players, which are further encouraged by high premiums that global companies are willing to pay to get a platform company in India.”

According to data from VCCedge, the value of private equity deals in the engineering sector came down to $209 million in 2013 from $344 million in 2012. The mergers and acquisitions deal size also went down to $1.1 billion from $1.4 billion in last year.

“India’s reputation as a cheap manufacturing base with easy availability of skilled manpower is also helping, especially now that China’s labour costs are moving up,” Seth added.

Last month, US engineering giant Emerson Group had acquired Pune-based engineering company Virgo Valves and Controls, which makes valves for oil and gas, power and mining industries, for $400 million.