SJS makes a significant impactful acquisition

SJS is acquiring 90.1% stake in Walter Pack Automotive Products India Private Limited (WPI).

• WPI is a 85% subsidiary of Walter Pack Spain(WPS) . Remaining 15.0% is held by the Indian promoter and founder, Mr. Roy Mathew.
• SJS is acquiring the full 85% of WPS and 5.1% from Mr Mathew.
• Mr Mathew will continue to hold the balance 9.9% and will continue to lead the business.
• Consideration for the transaction is fixed at Rs 239.3 cr
  • Total upfront consideration to be paid at closing would be Rs 229.8 cr and balance Rs 9.5 cr would be paid over the next 18 months.
  • Transaction is expected to close in 5-6 weeks
• WPI’s financials –
  • FY 2022-23 (Provisional) – Rs 120 cr
  • FY 2021-22 – Rs 99 cr
  • FY – Rs 50 cr
• Over two-thirds of WPI revenues are from the automotive segment (passenger vehicles) and the balance one-third are from the consumer durables segment.
• SJS intends to finance the transaction as follows:
  • Rs 30 cr via preferential allotment to SJS Promoter & Co-Founder, Mr. K. A. Joseph
  • Rs 75 cr debt
  • Rs 1,34.3 cr from existing cash balance

Key considerations on the transaction

• WPI (because of WPS) is one of the very few companies in India that is proficient in advanced IMD (In-Mold Decoration), IMF (In-Mold Forming), IML ((In-Mold Labeling) and IME (In-Mold Electronics) technologies, providing a strong technological advantage. As per SJS, the acquisition will reinforce it’s IML capabilities and add IMD technology and 2k moulding capability.
  • SJS has, as part of this transaction, also signed a 3-year service & technology support agreement with WPS regarding the ongoing exchange of know-how.
  • WPS also seems to be looking forward to the partnership with SJS to grow in Asia.
• The acquisition is size-wise significant for SJS given that the acquired revenues are 40% of SJS’s existing revenues
• Exact profitability of the acquisition has not been provided. However, as per SJS management, acquired EBITDA is 1/3rd of current SJS.
  • Revenues at 40% vs EBITDA at 33% means, profitability though close is currently marginally lower than SJS. Hopefully, with synergies it would improve.
• Acquisition has happened at approx 2.2x of revenues. SJS is currently trading at 4.5x of revenues. The acquisition therefore can be considered as value accretive for the shareholders (based on the prevailing metrics).