Amara Raja Batteries plans backward integration of its supply chain

27 Sept 2022 , 09:30 AM

Amara Raja Batteries Limited (ARBL) announced a proposed transaction to integrate its supply chain, resulting in margin improvements, by bringing Mangal Industries Ltd.'s (MIL) Plastics Component for Battery Business into its own fold via a scheme of arrangement involving the demerger of MIL's Plastics Component for Battery Business into ARBL (Scheme).

MIL's Plastics Component for Battery Business serves just ARBL, providing plastic containers, covers, minor pieces, handles, and jars used in batteries. It presently has a 37,000+ MTPA capacity with 150 Injection Moulding Machines spread over three manufacturing locations.

As payment for the Scheme, shareholders of MIL as of the record date will receive 65 equity shares of ARBL for every 74 equity shares owned by them in MIL.

This proposed purchase will streamline corporate operations by bringing plastic molding skills in-house and backward integration of the supply chain. Margin improvement and yearly recurring post-tax synergies of Rs5 crore to Rs6 crore are estimated to benefit the company. The proposed deal is estimated to be EPS accretive in its first year of being effective.

The Scheme is subject to the required statutory and regulatory approvals, including those of the NCLT, stock exchanges, SEBI, and each of the firms' respective shareholders.

At around 9.28 AM, Amara Raja Batteries was trading at Rs487.35 up by 0.55% from its previous closing of Rs484.70 on the BSE. The scrip opened at Rs493 and touched intraday high and low of Rs493.55 and Rs485.80 respectively. 

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