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Japan’s Kyokuto Kaihatsu Kogyo acquires Bengaluru-based Satrac Engineering


Mumbai: Japan’s construction equipment manufacturer Kyokuto Kaihatsu Kogyo has acquired Satrac Engineering, a Bengaluru-based manufacturer of special-purpose vehicles such as truck tipper bodies, trailers, and tank trucks in India.

The company that is a supplier to all leading truck OEMs, most major logistic companies and retail fleet owners in India is being valued at an enterprise value of around $30 million (around Rs 220 crore), sources said.

The Nishinomiya, Japan headquartered company has $1.1 bn revenue and offers special purpose vehicles such as dump truck, sprinkler truck, Concrete boom pumps, Transit mixers, tailgate lifter, tank truck and pneumatic bulk carrier. The company has affiliate entities in Japan, China, India and Indonesia.

“The Indian special-purpose vehicle market has been temporarily stagnant due to last year’s increased axle norms and tightening of financing by financial institutions and the impact of the Covid19 disaster. However, in the medium to long term, demand for construction and logistics vehicles is expected to expand due to the promotion of large-scale infrastructure projects and growth in logistics and steel and cement industry,” said Tatsuya Nunohara, President of Kyokuto.

Demand for environmental vehicles, such as refuse collection vehicles, is also expected to grow, particularly in urban areas, due to an increase in the amount of garbage generated by population growth and economic growth, as well as the policies of Clean India and Smart City promoted by the government. “Our group plans to further strengthen our business foundation in India by securing excellent manufacturing bases and customer relations in southern India through the acquisition of Satrac and expand and develop our special-purpose vehicle business in the country while utilizing the business and technical platforms that we have cultivated till now,” he added.

Satrac Engineering Private Limited (SEPL) was incorporated in 1997 by M. C. Bantwal and Geetha Bantwal. SEPL is engaged in manufacturing of trailers, tippers, tractors and various other truck bodies for some of the major truck and engineering equipment manufacturers companies. Its manufacturing unit located at Dabaspet, Bangalore.

“Satrac remains a very well recognized tipper, trailer and body supplier to the Indian CV industry. We see a great fit between Satrac’s manufacturing excellence and Kyokuto’s technological expertise and are delighted to be a part of their growth story in India,” said Mrinal Bantwal, Managing Director of Satrac.

Lincoln International was the financial advisor to the deal.

“This transaction, coming in the midst of significant industry headwinds, reiterates the continuing global interest for high quality industrial businesses in India and more specifically the increased activity in the Indo-Japan corridor,” said Preet Singh, Managing Director and head of Industrials at Lincoln India.

Total operating income of Satrac Engineering stood at Rs 210.93 crore as on March 31, 2019, a Care Ratings release in March 2020 shows. The company’s profit after tax or PAT was Rs 9.3 crore during the same period.

“The capital structure marked by the overall gearing ratio has strengthened from 1.45x as on March 31, 2018 to 0.28x as on March 31, 2019 due to increase in net worth backed by y-o-y accretion of profits to reserves along with a nil outstanding balance of working capital as on March 31, 2019,” Care ratings release said. “The debt coverage indicators marked by the PBILDT interest coverage ratio was also strong at 6.27x and total debt to GCA stood comfortable at 0.54x in FY19. The improvement in debt coverage indicators was primarily due to improved cash accruals as well as decline in finance cost led by scheduled repayment of term loans.”

Satrac competes with companies such as Tata International DLT, Kedaara Capital-backed Ajax Engineering among others. Last year, Tata International and Sri Lanka-based Dutch Lanka Trailer Manufacturers (DLTM) said they had sold their JV Tata International DLT (Tata DLT) to Canyon Point Investment, a wholly-owned subsidiary of private equity firm ADV Partners. However, that deal did not go through post announcement. “Most of the deals in the sector are around 8-9 times EBITDA,” an investment banker with knowledge of the sector said.

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