M&M Auto Case Study M&A – Synergies 5th Sept-08. V. S... · Engineering Design Styling Engineering Design Styling MES ... Forging Sheet Metal Stamping ... 1st Steering • 1st 4000T

M&M Auto Case Study

M&A – Synergies

5th Sept-08

Mergers & AcquisitionsIn-house Investment Banking Solutions

1

Environment continues to remain favorable

Partnering

$20Bn * $20Bn *2015India

Advantage Suppliers driving

i tiLCC

Addressability500 Bn

Partnering across

verticalsIncreasing

Vendor

innovation

Vendorrationalisation

Autocompcontribution to India

N. American suppliers

under severe pressure

Auto industryshare of India’s

3.5 mn jobs by ’155% of GDP by ‘15

p essu eGDP: from 5% to

10% by 2015


2Source : ACMA, SIAM, BCG Research

Mission StatementT t I di ’ t V l bl I tiTo create India’s most Valuable, Innovative,

“Art to Part” auto component entity

that partners with its global customers

to meet & surpass their business needs


3

The Vision

2010

X

$1Bn

X

$1Bn

X


4

$1Bn

ConceptionM&M

Automotive Farm Equipment SYSTECH

Engineering Design

Styling

Engineering Design

Styling MES

Assembly

Testing

M k ti / S l

Assembly

Testing

M k ti / S lMarketing / Sales

Gear Manufacturing

Marketing / Sales

Gear Manufacturing

Purchasing Purchasing

Transmission / Axle

Sheet Metal Stamping

F d

Transmission / Axle


F d


5

Foundry Foundry

AdolescenceM&M

Automotive Farm Equipment SYSTECHEngineering Design

Styling

Engineering Design

Styling MESAssembly/Mfg

Engine/transmission

Marketing / Sales

Assembly/Mfg

Engine/transmission

Marketing / SalesSSBUSSBU

Marketing / Sales

Purchasing

Gear Manufacturing

Marketing / Sales

Purchasing

Gear Manufacturing

Drive Train / Axle


Foundry

Drive Train / Axle


Foundry


6

Foundry Foundry

Growing upM&M

Automotive Farm Equipment SYSTECH

Styling Styling

SSBUEngineering Design Engineering Design

Assembly

Testing

Marketing / Sales

Assembly

Testing

Marketing / Sales

MES

Marketing / Sales

Gear Manufacturing

Marketing / Sales

Gear Manufacturing

Purchasing PurchasingACBU

Gear Manufacturing

Transmission / Axle


F d

Transmission / Axle


F d

Forging


Foundry


7

Foundry Foundry Foundry

Forgings: Global Strategy

EUROPE

Market ExpansionCHINAUSA/Canada

Import Technology/SkillProduct portfolio

expansionMarket Expansion

Future GrowthMarket

Market Expansion

INDIA

PH. I (2005-06): Build Capacity

INDIA

Low-cost base Capacity

PH II (2006 07) B ild C bilit

PH. III (2007 - ): Build Global Co

PH. II (2006-07): Build CapabilityWorld-class quality SCM

capabilities/Brand build-up


8

M&A geared to fill strategic gaps

M&A Criteria Companies

i Technology

i Market Access

i Amforge, India

i Stokes Forgings, UKi Market Access

i Quality of Management

L ti E

i Schoeneweiss Forgings,

Germanyi Location: Europe

i Complementary

d t tf li

i Jeco Holdings, Germany

i Precision Engineering, product portfolio

India

i Hinoday, India


9

M&A Strategy…we have acquired companies of pedigree

Plant Year Established

F lk th 1829Falkenroth 1829

Schoeneweiss 1866

Jeco 1885Jeco 1885

GSA 1891

Stokes 1908

Note: Falkenroth, Jeco & GSA are plants of Jeco Holdings


10

Mahindra Forgings - GlobalForgings : Evolution

• Mahindra ForgingsEurope formed

2nd 4000T & 6000T press at

ChakanOrganic

Acquired

p• Machining at Stokes• China MOU• S Africa term sheet

• 1st 4000T press1st Steering

Growth

Inorganic

Growth

Both

Acquired Crankshaft hi i

Schoeneweiss1st 4000T pressat Chakan

• New m/c shopat Jeco

1st Steeringknuckle

machine line2nd steering

knucklemachining

li

Acquired JecoAcquired

Both

qAmforge

StokesAcquired

machining line

Vauxhall machining line

lineq

Amforge

Q407

Q108

Q208

Q308

Q408

machining line acquired

Q206

Q306

Q107

Q207

Q307

07


11Grow Peak to PeakGrow Peak to PeakQ1

06

06

Forgings : Enabling structure

MFL SCH JECO STOKES

M&M

MFLM&M: 47%

Others: 53%M&M: 100% M&M: 67%

Scholz: 33%M&M: 100%

SCH JECO STOKES

M&M: 60%

M&M

M&M: 60%Others: 40%

SCH JECO STOKES

MFL

MFL: 100% MFL: 100% MFL: 100%

SCH JECO STOKES

N t MFL h ld J &S h i th h M iti h ldi i


12

Note: MFL holds Jeco &Schoeneweiss through Mauritius holding companies

Mahindra Forgings: Among the five largest globallyLeague of the Largest Global Forging Companies

Company, HQRevenue

($ Mn) FY07/CY06

1,419Thyssen, Germany

Bharat Forge (BFL), India 923

Sumitomo, Japan

Hirschvogel, Germany

792

594

Amtek, India

g , y

MFL, India F 08

~401

648

Amtek, India

Aichi, Japan

Dongfeng China

370

91


13

Dongfeng, China 91

Source : M&M Research

Opportunity to Create ValueA f M h 26 2008

Company Market Cap (Rs cr) P/E Ratio

As of March 26, 2008

MICO 11850 20

Bharat Forge 6100 24

E id 5450 24Exide 5450 24

Motherson 3500 27

Mahindra Forgings* Avg: 1600 Avg: 13High: 2600 High: 20Low: 1000 Low: 8Mahindra Forgings Avg: 1600 Avg: 13

Amtek 951 7

Sundaram Fasteners 675 9.5

High: 2600 High: 20Low: 1000 Low: 8

Rico 350 15


14

* Institutional investors have continued to increase holdings in Mahindra Forgings

The scale achieved is an advantage

OperatingMargin Large

20

g(%)

gCompany Set

TOTAL

18

19

17

18

16

SmallCompany Set


15

FY 03 FY 04 FY 05 FY 06 FY 0715

Source : Edelweiss Report on Indian Auto Component Industry

Starting Out……Getting There.

MSATSYSTECH

SSBU ACBU MES

MESSTEEL COMPOSITESSTEEL COMPOSITES MESMES+ Acqn

$ 10 Million

STEELMUSCO

$ 120 Million

COMPOSITESSiroplast + Acqn

$ 5 Million

STEEL

$ 177 Million

COMPOSITES

$ 8 Million $ 33 Million

MES

Foundry Unit+ Acqn

$ 0

Sheet MetalKanhe, PSSL, Rudrapur

$ 30 Million

Forging + Acqn, Amforge, UK, Forge, Vauxhall, m/c

$ 40 Million

CASTINGS

$ 65 Million

STAMPINGS

$ 46 Million

FORGINGS

$ 564 MillionFY07 :$215

$910Million

Gear UnitSAR Auto + Acqn

$ 10 Million

GEARS

$ 17 Million

Mn


16

Our ‘marquee’ customers


17

Systech: among the largest Indian auto comp groups within a few years

Indian Companies

Company FY08 Revenue(Rs Cr.) Comment

4,806Bharat Forge Enviable track record

3,763

4,678

Amtek

MICO ,

3,644

3,372Tata Autocomp

Sundaram Fasteners


18

1,654Sundaram Fasteners

Walking the talk : our cutting edges

•Fifth largest forgings company in the world

•Engineering services is growing rapidly

•Poised to recreate the forgings story in gears

•Other growth areas: castings, stampings, aerospace, steel p ,


19

Mahindra Forgings : Vision

• Top 2 in India - 2010• Top 5 Globally - 2015Leadership

• Multi locational presence + India/China as low cost base• Diverse customer baseGlobal• International management talent

D i t th h tti d t h l

Global

• Dominate through cutting edge technology• Adoption of best processes & systemsInnovation

• Value added products for higher margins• International price with LCC costFinancial


20

THANK YOUTHANK YOU


21

Documents

M&M Auto Case Study M&A – Synergies 5th Sept-08. V. S... · Engineering Design Styling Engineering Design Styling MES ... Forging Sheet Metal Stamping ... 1st Steering • 1st 4000T