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Rane (Madras) Ltd is selling its struggling US arm Rane Light Metal Casting Inc (RLMCI) as it has finalised an agreement to divest its stake for about $5.6 million.
The company has executed a share purchase agreement with US-based Kentucky Industrial Holdings, Inc, (KIH) to transfer its holding in RLMCI to KIH, it said in a filing to stock exchanges.
RLMCI manufactures high-pressure aluminium die casting for automotive and non-automotive applications. In FY23, it reported a turnover of Rs 232 crore and accounted for 9.78 per cent of the consolidated turnover of Rane (Madras). RLMCI’s net worth was Rs 32.3 crore in FY23.
The decision to sell RLMCI owes to a setback in efforts to revive the company’s business.
Through its wholly-owned arm Rane (Madras) International Holdings (RMIH) BV, The Netherlands, Rane (Madras) had infused equity investment of $43.86 million in RLMCI, as of March 31, 2023.
Also read:Rane Group companies bag ₹331-crore worth of new orders in Q1
RLMCI was facing global supply chain shortages, leading to a delay in the launch of key new businesses, decline in off-take from existing customers, and an unfavourable product mix, which impacted profitability since labour and salary costs are largely fixed. It started incurring significant losses.
However, in the past couple of years, the management embarked on a turnaround plan for business development and operational improvements, but there was no post-Covid recovery in the US market.
Though the semiconductor shortage has somewhat eased, the US auto industry has slipped into a slowdown, leading to poor off-take of new and existing products.
A few months ago, the company board decided to explore options for divestment/disposal of RLMCI and sought prior approval of shareholders through postal ballot. Last month, the board approved divestment through sale of entire holding in RLMCI held through RMIH.
Meanwhile, the light metal casting business in India is launching new programmes in FY 23-24 to improve capacity utilisation and revenue growth.
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