Amara Raja Batteries Limited (ARBL) on Monday announced a scheme of arrangement that involves demerger of plastics component for battery business from Mangal Industries Ltd (MIL) and merge the division into ARBL.
“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,’‘ Jayadev Galla, Chairman & Managing Director, ARBL said in a release.
According to Harshavardhana Gourineni, Executive Director, Automotive & Industrial Batteries, 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 utilisation of manpower and reducing logistics costs.’‘
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 over 37,000 MTPA with 150 injection moulding machines located at three manufacturing facilities.
On effectiveness of the scheme, the shareholders of MIL as on the record date will receive 65 equity shares of ARBL for every 74 held.
MIL is engaged in various businesses such as plastic component for battery business, manufacturing of auto components (including fasteners, plastics, copper inserts /connectors and others), metal fabrication, storage solution, lead bushes and trading of various products, etc.
This proposed transaction will simplify the business operations by backward integration of the supply chain and bringing plastic moulding capabilities in-house. The company is expected to benefit from margin improvement and annual recurring post-tax synergies of ₹5-6 crore. The proposed transaction is expected to be EPS accretive from the first year of it being effective.
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.