Amara Raja Batteries proposes backward integration of plastic moulding business, Auto News, ET Auto

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Amara Raja Batteries Limited (ARBL), India’s industrial and automotive battery major, proposes to demerge and bring the plastics component for battery business of Mangal Industries Ltd. (MIL) into its own fold. The transaction is to integrate its supply chain leading to margin improvements.

The plastics component for battery business of MIL caters exclusively to ARBL, providing plastic containers, covers, small parts, handles and jars that are used in batteries. It currently has a capacity of 37,000-plus tonnes a year with 150 injection moulding machines at three manufacturing facilities, ARBL said in a media release on Monday.

When implemented, after all legal formalities and approvals, the shareholders of MIL as on the record date will receive 65 equity shares of ARBL for every 74 equity shares held by them in MIL, as consideration for the scheme.

This proposed transaction will simplify the business operations by backward integration of the supply chain and bringing plastic moulding capabilities in-house. ARBL is expected to benefit from margin improvement and annual recurring post-tax synergies of INR 5 crore to INR 6 crore. The proposed transaction is expected to be EPS accretive from the first year of it being effective, the release added.

The Scheme is subject to the necessary statutory and regulatory approvals including approvals of NCLT, the stock exchanges, SEBI and the respective shareholders of each of the companies.

Jayadev Galla, chairman and managing director, ARBL, said, “This is in keeping with our theme of consolidating and unlocking synergies as we continue to pursue value accretive growth opportunities that will lead ARBL to the leadership position in the energy and mobility space. This step is in alignment with the best interest of our shareholders.”

Harshavardhana Gourineni, executive director, Automotive and Industrial Batteries, said, “The move strengthens ARBL’s control of the supply chain and augments our battery recycling initiatives. It also helps us in improving margins by better utilization of manpower and reducing logistics costs.”