Tube Investments buys Shanthi Gears for Rs 464 cr

Will acquire 44% from promoters, then make open offer for addl 26%

Tube Investments of India Ltd, (TII) flagship company of the Murugappa Group has signed a share purchase agreement to acquire 44.1 per cent stake in Shanthi Gears Ltd, a leading manufacturer of industrial power transmission products, headquartered in Coimbatore, India. The acquistion cost is around Rs 464 crore.

Consequently, TII will be making an open offer to the extent of 26 per cent. The total cost of the acquisition, including the public offer, is expected to be Rs 464 crore assuming full response to the proposed open offer pursuant to Sebi regulation.

Shanthi Gears makes a wide range of products that include gears, gear boxes, geared motors and gear assemblies. It has been designing, manufacturing and supplying various kinds of gears and gearboxes to various industries for a variety of applications for the past four decades.

The Company has manufacturing operations in Coimbatore spread across 6 units including a foundry division and markets its products in India and abroad. The turnover of the company was Rs 178 crore in FY12 with a profit after tax of Rs 28 crore. Shanthi Gears is debt-free as on March 31, 2012.

Commenting on the acquisition, M M Murugappan, Chairman, Tube Investments and Vice Chairman, Murugappa Group, stated that “Shanthi Gears is one of the largest organised players in India in the gears segment and its product profile is targeted towards more of niche products and greater customer retention. We hope to leverage our understanding of the engineering space and our existing customer relationships to help scale the business further”

L Ramkumar, Managing Director, Tube Investments stated that “Addition of Shanthi’s product portfolio substantially enhances our ability to service other industry segments and reduce our reliance on the auto sector, at the same time growing our presence in the value added businesses.”