Mahindra CIE set to acquire Bangalore-based Bill Forge -:- Equity Research

Mahindra CIE is set to acquire 100 percent stake In Bangalore-based Bill Forge, reports CNBC-TV18. Bill Forge which manufactures a variety of cold, warm, hot-forged and machined components for the automotive and non-automotive sectors is likely valued around Rs 1,200-1,300 crore, sources say. The deal might be done through a mix of cash and preference share issue and Mahindra CIE board will be meeting on September 12 to contemplate fund raising. The acquisition will augur well for Mahindra CIE as it will help reduce client concentration. Currently, over 55 percent of the company’s revenue comes from Tata Motors and M&M . Considering Bill Forge had FY16 earnings before interest, tax, depreciation and amortisation (EBITDA) of Rs 120 crore, the deal is valued at roughly 10 times trailing EV/EBITDA. This looks a fair deal as average multiples in the sector are around 9-10 times EV/EBITDA. While Mahindra CIE declined any comment, SP Tulsian of sptulsian.com says the deal, if it goes through will be positive for the company considering it is a quality auto ancillary company and any kind of inorganic growth will bode well.