Gabriel India zooms 71% in 7 days; Elara Capital sees 10% more upside

In the past two trading days, the Gabriel stock price has zoomed 44 per cent after the Board of Directors of the auto ancillary company approved a Composite Scheme of Arrangement.

Gabriel India share price

 

Shares of Gabriel India (Gabriel) were locked in the upper circuit for the second straight day, surging 20 per cent to hit a new high of ₹1,011.45 on the BSE in Wednesday's intra-day trade in an otherwise subdued market. In comparison, the BSE Sensex was trading 0.04 per cent lower at 83,663 at 10:22 AM.

 

In the past two trading days, the stock price the auto ancillary company has zoomed 44 per cent after the Board of Directors of Gabriel approved a Composite Scheme of Arrangement, involving Gabriel India, Asia Investments Pvt Ltd (AIPL), and Anchemco India Pvt Ltd (Anchemco).

 

The stock was quoting higher for the seventh straight trading day, skyrocketing 71 per cent during the period.   Track Stock Market LIVE Updates

Gabriel - Composite Scheme of Arrangement

 

This scheme will result in vesting AIPL’s automotive business undertaking, comprising Anchemco’s business (brake fluids, radiator coolants, diesel exhaust fluid / ad-blue, and PU/ PVC based adhesives) and investments in Dana Anand India Pvt. Ltd, Henkel ANAND India Pvt. Ltd and ANAND CY Myutec Automotive Pvt., Ltd into Gabriel. 

 

Gabriel will issue 1,158 equity shares of ₹1 each for every 1,000 equity shares of ₹10 each held in AIPL to the shareholders of AIPL.

 

The scheme will accelerate profitable growth with better margins, creating substantial shareholder value through EPS accretion and higher return on equity, Gabriel said. At a Group level, the management said they have set a revenue target of ₹50,000 crore by 2030 and see Gabriel leading the way.

 

This Scheme will consolidate the business of the demerged undertaking of AIPL in automotive components and products like drivetrain products including transmissions for electric vehicles (EVs), Body in White and NVH Products and solutions, brass and steel synchroniser rings, aluminum forgings, brake fluids, radiator coolants and diesel exhaust fluids (DEF) / Ad-Blue for 2W, 3W and 4W vehicles and trucks and PU and PVC based adhesives into Gabriel.

 

This inclusion, together with the recently added sunroof business, will transform Gabriel from a mono-product suspension company into a diversified, technology-driven mobility solutions provider, and reducing the dependency on a single product line by expansion into new segments, geographies, the aftermarket product range, and railways product range, the company said in statement.

 

Elara Capital raises target price for Gabriel to ₹1,115

 

Elara Capital reiterated its ‘buy’ rating on Gabriel India and raised its target price to ₹1,115 per share.  

As per their analysts, the greatest potential for re-rating for any auto ancillary company arises from transition from a single- to a multi-product portfolio. Auto ancillaries have outperformed original equipment manufacturers (OEMs) in the past decade on four key counts: a) increasing products, b) expansion in segments, c) expansion in geographies and d) inorganic expansion. Gabriel is a play on all four. The deal is EPS accretive by ~41 per cent on FY25 financials, which is a positive.

 

“While all approvals are likely to be completed in the next 10-12 months, we have not yet factored this into our estimates. However, proforma, our FY27E and FY28E EPS is likely to increase from ₹22.8/26.6 to ₹31/35.3 for FY27E/28E, assuming a modest ~8-10% CAGR in profits for the acquired entities. The target multiple on proforma financials is ~35x (in line with Endurance on FY27E) given that this diversification may continue going forward. The FY25-27E EPS CAGR on proforma financials is expected to be ~45 per cent,” Elara Capital said in the company update.