Minda Corp slips 9% in 3 days after it acquires 15.7% stake in Pricol

Shares of Minda Corporation (MCL) dropped 4 per cent to Rs 194.30 in Tuesday’s intra-day trade and extended its two day decline, after the company acquired 19.14 million equity shares, representing 15.70 per cent of equity capital of Pricol via open market for Rs 400 crore.

MCL bought Pricol’s shares at a price of Rs 208.98 per share. This is an open-market transaction and no prior approvals have been obtained, the company said.

Pricol is engaged into automotive components and products/equipments business. MCL said that the acquisition of equity shares of Pricol is merely a financial investment, without providing the company any special rights in Pricol other than the rights as a shareholder of Pricol.

MCL primarily serves auto OEMs across two main verticals – Mechatronics & Aftermarket [i.e. MCH – safety & security system (lock & key, smart key), die-casting, starter motors, etc] and Information & Connected Systems (i.e. ICS – mainly wiring harnesses, sensors and instrument clusters).

Analysts at ICICI Securities 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, healthy technological capabilities, and customer profile at Pricol.

"Since the valuations and quantum of further investments for this strategic intent cannot be ascertained at this point in time with risk of company overpaying for it amid lack of clarity on further line of action in this domain, we downgrade the stock to 'hold'," the brokerage firm said.

Moreover, they remain positive on this space for quite some time, given the company’s endeavour to grow ahead of industry and development of new technological capabilities.

“However, we now downgrade the stock from 'buy' to 'hold' amid lack of clarity on the company’s strategic intent behind this investment in Pricol and b/s risk in case of any potential acquisition,” the brokerage firm said.

However, it does clearly demonstrate the future content rise potential in digital instrument cluster space of which Pricol is a prominent player, with proven technological capabilities, new tie-ups as well as customer relationships. Hence, analysts at ICICI Securities retain  positive view on Pricol with a 'buy' rating.

“We retain our BUY rating on Pricol amid a wider opportunity play, with new TLA partnerships and management walking the talk over b/s repair and industry leading growth with ambitious vision 2026 of around Rs 4,000 crore sales,” analysts added.

Meanwhile, shares of Pricol quoted 0.27 per cent lower at Rs 204.95 at 11.31 am. In comparison, the S&P BSE Sensex was up 0.35 per cent at 60,906.