Automotive components maker Lumax Auto Technologies Ltd has agreed to acquire the rotational moulded plastic business of New Delhi-based OK Play Group.
The acquisition will provide Lumax Auto access to latest rotational moulding technologies, the company said in a statement. It will also enable the company to exploit fast-emerging growth opportunities in the automotive roto-moulded plastic fuel tanks market for commercial vehicles, tractors and off-road vehicles.
Lumax said the enterprise value of the business it is buying will be a multiple of 5.67 times the average of its earnings before interest, tax, depreciation and amortisation for three years through March 2020.
The target business posted EBITDA of Rs 9.6 crore, Rs 34.1 crore and Rs 38.3 crore for 2016-17, 2017-18 and 2018-19, respectively. Lumax didn’t disclose the estimated EBIDTA for the current fiscal year.
However, based on the multiple of 5.67 times and the average EBITDA for the three years through 2018-19, the estimated enterprise value of the target would be around Rs 155 crore ($21.6 million). To be sure, this could change depending on the actual EBITDA for the current financial year.
Lumax said the business it is acquiring from OK Play Group, which includes OK Play India Ltd and OK Play Auto Pvt. Ltd, will include products such as plastic fuel tanks, various kinds of combination tanks, fenders, dashboard, bus seats, plastic roofs, interior compartment and panels for commercial vehicles, tractors and off-road vehicles.
This business generated revenue of Rs 125.8 crore for the year through March 2019, up from Rs 109.6 crore the year before.
Lumax also said that it will pay 90% of the deal value upfront when the transaction closes. The transaction is likely to close by the end of March.
The balance 10% will be paid by July 31, 2023 and will be computed based on six times the 2022-23 EBITDA of the auto component business.
In addition, Lumax will also provide a loan of Rs 20 crore to OK Play India, to be repaid by July 2023.
Separately, OK Play India informed stock exchanges that the sale will generate cash flows for the company and enable it to focus more on its electric vehicles business.