Pitti Engineering (513519) M&A announcement summary

Deal rationale and strategic fit

• Acquisition of 100% share capital of Dakshin Foundry (DFPL) at an equity valuation of INR 153.12 crores to enhance technical capabilities, expand product range, and increase production capacity, especially in smaller and more critical castings.

• Dakshin Foundry specializes in high-quality grey and ductile iron castings, serving railway, metro, and power generation sectors, aligning with existing business segments and supporting inorganic growth strategy.

• The acquisition strengthens relationships with major clients and consolidates the company’s position in the railway and energy markets.

• Aligns with the acquirer's strategy to complement existing business and subsidiaries.

Financial terms and conditions

• 100% equity of Dakshin Foundry acquired at an equity value of INR 153.12 crores, including business value and working capital as of June 30, 2024.

• Dakshin Foundry is debt-free with a positive cash balance of INR 42.71 crores as of June 30, 2024.

• Funded through INR 26.63 crores from QIP funds and INR 76.49 crores from existing cash balances.

• Dakshin Foundry reported FY2024 revenue of INR 70.89 crores, EBITDA of INR 18.63 crores, and other income of INR 4 crores.

• The transaction is EPS accretive and will be consolidated from the current quarter.

Synergies and expected cost savings

• Acquisition enables efficient manufacturing of castings in the 40–300 kg range, complementing existing capabilities and increasing operational strength.

• Enhanced technical skills and development processes from Dakshin Foundry expected to improve margins and efficiency.

• Consolidation with common customers will strengthen supply chain integration and vendor relationships.

• Potential to increase the share of machined components, targeting a 50/50 mix over the next 1–1.5 years.