The management of Pricol Ltd, a manufacturer of auto parts and precision engineered products, has said Minda’s 15.7 per cent share purchase in the company is no cause for alarm or worry now; the company’s stay is committed to its business and intends to invest ₹600 crore in capacity expansion.

“We want to create value for all of our stakeholders in a quest to achieve Vision 2025. We intend to remain in control of Pricol, by legal means, by financial means, or every other means for which we have strategies in place. We have evaluated all of our options, and we keep all of our cards open to ensure that we remain in control of this company,” Vikram Mohan, Managing Director, said during a ‘business update’ conference call with the investors.

A couple of weeks ago, Noida-headquartered Minda’s stake purchase for ₹409 crore in Pricol created a buzz in the market. In its “business update” call with the investors, the management of Minda maintained that the shares of Pricol were purchased solely for the investment of the surplus funds available with the company.

But industry analysts don’t think so. “We see less merit in this transaction to be just a financial investment and believe it to have a strategic intent to either acquire Pricol in full or seek controlling stake or buyout of the instrument cluster division, given the potential content increase in this domain and healthy technological capabilities and customer profile at Pricol,” said analysts at ICICI Securities.

Stating that the entire leadership team at Pricol is committed to its business, Mohan said the company came out of the tough times that it went through during the pandemic phase. “Pricol was staring at a very uncertain future. Both personally as a promoter group and as an organisation, we were at our lowest ebb. We had a very high level of debt. We didn’t know where next month’s payroll was going to come from, and we had faced a lot of uncertainty,” he said.

The promoter group had no second thoughts about the future of Pricol then. However, by divesting some of its overseas investments and impairing investments, it strengthened the balance sheet. My family members and I signed personal guarantees and placed a significant portion of our wealth as collateral to raise capital for the company at that time. In two-and-a-half years, Pricol has become a completely long-term net debt-free company with a very strong balance sheet, and a “very, very healthy pipeline of new businesses,” said Mohan.

Pricol has now embarked on significant capacity expansion drives to cater to the new businesses that it has secured. “We will be investing close to ₹600 crore over the next few quarters to create additional capacity to cater to this additional business that we have won. The capital will be met almost entirely by internal accruals,” said Mohan.

Discussing the improvements in financial parameters, he said Pricol’s return on capital employed (ROCE) turned negative during FY19 (-20.83 per cent) and FY20 (-20.86 per cent), due to the losses and impairments of its overseas subsidiaries. In FY21, despite losing three months of production, it had a ROCE of 10.65 per cent. In FY22, it increase further to 12.44 per cent, and in the current fiscal (for the 9-month period), Pricol’s ROCE stood at 15.64 per cent.

“Every plant of the company is generating cash profits. Every subsidiary of the company is generating cash profits, said Mohan.

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