India: Blackstone may exit auto parts JV Sona Comstar via IPO in two years

Photo: REUTERS/Brendan McDermid

Global private equity fund Blackstone may exit its newly formed auto components joint venture (JV), Sona Comstar, within the next two years.

“Blackstone will seek to exit the business through an initial public offering (IPO). This should probably happen in the next two years. We will begin the process in the next two years,” said Sunjay Kapur, chairman, Sona Comstar.

Blackstone last week completed the acquisition of a 33% stake in Kapur-led Sona BLW, and merged the auto parts company with Comstar Automotive Technology Ltd, the other subsidiary owned by the PE firm in India. The JV offers products for conventional, hybrid and electric vehicles-focused technology platform.

Sona BLW Precision Forging is a family enterprise promoted by Kapur. Blackstone purchased JM Financial’s 33% stake in Sona BLW in March 2019.

Last year, Blackstone had acquired Chennai-based auto parts maker Comstar Automotive for about 1,000 crore. It is part of the PE firm’s automotive portfolio focused on electric charging and starting solutions.

Blackstone declined to comment on its IPO plans. According to the two people mentioned above, Kapur holds a 35% stake in Sona Comstar, while Blackstone owns 65%.

The valuation of Sona Comstar has increased from $400 million to about $510 million. Kapur, who owned 67% in Sona BLW, said that he did not dilute his stake in the company.

“When they (JM Financial) exited, we did not go for the IPO because we thought we can build a bigger business. We did a round with PE firms and felt that Blackstone was the best that we could bring to the table,” he said, adding that he does not plan to exit the business or dilute his stake in the future.

The JV enables both companies to get access to each other’s products and technologies, customer portfolio and territorial markets. For example, the synergies will enable Comstar, which earns 85-90% of its revenues from exports, garner presence in the Indian market. Sona BLW, on the other hand, will get access to the Chinese market.

The JV also allows Sona BLW to get access to Comstar’s biggest customer, Ford Motor Co., while Comstar can tap into Sona’s customer base in Europe, including Daimler AG.

Kapur said the focus is to remain relevant in an ever-evolving market with the advent of electric and hybrid vehicles, while continuing to supply components for internal combustion engine (ICE)-powered vehicles.

“We have supplied electric axles to the three-wheeler industry, but until now we have been buying the motor from a third party. With Comstar, which makes the world’s lightest starter motors for ICE and hybrid engines, our endeavour is to develop our own motor so that we can build our own axle entirely in-house and see how to scale up that product,” Kapur added.

Sona Comstar has set a target of $1 billion turnover by 2024 through organic and inorganic growth.

The company is looking to expand its manufacturing footprint in India. “We will keep looking out for other companies that we can acquire in the Indian marketplace,” said Kapur.

Sona Comstar, which is working on a joint technology roadmap, aims to develop electric drive units (EDUs). It plans to produce about 1.25 million differentials (gearbox parts) in India for electric vehicles next year, primarily for passenger cars.

“95% of these will be for the export markets,” Kapur added.

The article was first reported on livemint.com

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.