The Indian promoter of Sona Koyo Steering, the Kapur family, has decided to exit the 30-year-old company by selling their 25 per cent stake for Rs 419 crore. Japanese company JTEKT Corp (formerly Koyo), a technical partner since inception, will purchase this stake and also acquire another 26 per cent, taking its stake to 71 per cent. In an interview, Sunjay Kapur, chief executive officer at Sona Group, which will be left with revenue of Rs 3,000 crore (approximately 30 per cent lower), tells Ajay Modi the group will focus on growing its forging business in India and overseas. Excerpts:
What prompted you to exit a well-established profit generating business?
We have been partners for over 30 years with JTEKT, which owns the steering technology. We were working with them ever since the company started. JTEKT had an equity of eight per cent and then shored it up to 20 per cent. Together we have grown the business to revenues of Rs1,600 crore with healthy margins. But the business was restricted to India. While in our other group businesses such as forging, the scale is global and we are a leading player. JTEKT being the owner of technology is best positioned to manage the business.
What will be the group’s focus?
We want to start focusing on the forging business which is worth Rs 3,000 crore between India, Germany and Hungary. We have a large opportunity in the US where we currently export from India and Germany. It gives us an opportunity that steering cannot. We aspire to be a global player. We want to invest time, money and energy in areas where we have global opportunities.
Was that not possible while remaining invested in Soya Koyo?
We felt it was best to divest now when the market is good and business is healthy. We need to make investments to expand the forging business. We want to expand the Indian business from Rs 500 crore to Rs 2,000 crore in next four-five years. Customer demands are changing in terms of technology. We will set up a tech centre in Europe to expand our R&D. We have started supplying to electric vehicles. We would like to invest in more products.
Sona Group’s journey started with steering and you have decided to exit this business?
Our founder Surinder Kapur started his journey with gears with Bharat Gears. Then Sona Koyo Steering was set up to meet requirements of Maruti. In 1995, we restarted the gear business. The founder had passion for the gear as well as the steering business. I love the steering business as I ran it for years but we did not own the technology. It was borrowed.
Would your founder have been on board if he was living?
I am sure he would have.
This was the only listed entity within the group. Would you look at listing some of the business?
I am sure every company that grows also aspires to list. We will look at it. We have a private equity investor, JM Financial.
Will you look at acquisitions?
Our immediate aim is to expand and invest in newer technologies in automotive space. We will look at opportunities which we feel will make business sense for us. We would like to stick to automotive where we have a core strength.