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 strengthen operational 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 segments.

• The product range now efficiently covers castings from 40 kg to 300 kg, complementing existing capabilities.

Financial terms and conditions

• Total acquisition cost is INR 153.12 crores, including business value and working capital 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 is debt-free with a positive cash balance of INR 42.71 crores as of June 30, 2024.

• FY2024 revenue from operations was INR 70.89 crores, with EBITDA of INR 18.63 crores.

Synergies and expected cost savings

• Acquisition enables economies of scale in supply chain, increases production capacity, and enhances the machined components portfolio.

• Synergies expected from consolidating vendor relationships and leveraging technical capabilities for higher-margin products.

• Opportunity to increase machining share from 30% to potentially 50% over the next 1–2 years, improving value addition.