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Deal Proposal: MRF and Nocil

MRF, the largest tire manufacturer in India, has proposed acquiring NOCIL, India's largest manufacturer and supplier of rubber chemicals. NOCIL has over 40% market share in the domestic rubber chemicals industry and supplies 21 rubber chemicals to major domestic and global tire manufacturers. The acquisition would provide synergies between MRF's tire manufacturing and NOCIL's rubber chemicals supply, leveraging their long-standing relationships and NOCIL's focus on R&D and operating efficiencies. However, NOCIL derives two-thirds of its revenues from the cyclical tire sector and faces competition from rubber chemical imports. Its planned large capital expenditures also carry project risks.

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Pratik Tagwale
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127 views6 pages

Deal Proposal: MRF and Nocil

MRF, the largest tire manufacturer in India, has proposed acquiring NOCIL, India's largest manufacturer and supplier of rubber chemicals. NOCIL has over 40% market share in the domestic rubber chemicals industry and supplies 21 rubber chemicals to major domestic and global tire manufacturers. The acquisition would provide synergies between MRF's tire manufacturing and NOCIL's rubber chemicals supply, leveraging their long-standing relationships and NOCIL's focus on R&D and operating efficiencies. However, NOCIL derives two-thirds of its revenues from the cyclical tire sector and faces competition from rubber chemical imports. Its planned large capital expenditures also carry project risks.

Uploaded by

Pratik Tagwale
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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DEAL PROPOSAL

MRF AND NOCIL


PGP/22/3xx Himalay Sharma
PGP/22/3xx Dheeraj Reddy
GROUP 5 PGP/22/3xx Mukul Pareek
PGP/22/370 Pratik Tagwale
PGP/22/3xx Sagar Mantur
WIP

ACQUIRER
Madras Rubber Factory Limited (MRF) is an Indian multinational and
the largest manufacturer of tyres in India and the fourteenth largest
manufacturer in the world.

Products
 Tyres- manufactures tyres for passenger cars, two–wheelers, trucks,
buses, tractors, LCV, off–the–road tyres and aero plane tyres Beta: 0.89
 Conveyor Belting – manufactures its in-house brand of conveyor belts.
Market Cap(Mn): Rs273,225.91
 Pretreads – MRF has the most advanced pre-cured retreading system
in India and manufactures pretreads for tyres. Shares Outstanding(Mn): 4.24
 Paints - manufactures polyurethane paint formulations and coats used Dividend: 54.00
in automotive, decorative and industrial applications. Yield (%): 0.16
 Cricket - manufactures cricket bats, gloves, pads and other
accessories.
WIP
NOCIL Ltd is India's largest manufacturer and supplier of rubber chemicals. The
company is known for product their quality customer services and commitment

TARGET to environmental care. The company is a part of Arvind Mafatlal Group of


Industries a well-known Business House in India with diversified business
interests. The company is engaged in the manufacturing and sale of rubber
chemicals.
Done

TARGET ANALYSIS- NOCIL


Positives Negatives
Healthy Business Profile High revenue dependence on end user tyre industry
• NOCIL is the leader in domestic rubber chemicals industry with over 40% • NOCIL derives almost two-thirds of its revenues from the tyre sector, which in turn, is
market share. The company is also among few players globally with a wide largely dependent on the automotive sector, which tends to display cyclical trends.
product basket of 21 rubber chemicals. It has a long standing relationship with The commercial vehicle (CV) industry, which contributes a sizeable proportion to tyre
major domestic and global tyre manufacturers for 25 years supported by its demand in value terms, is the most cyclical, and also resorted to large scale imports
ability to meet their stringent quality requirements. As a result, NOCIL has of tyres from China and South East Asian countries in the recent past, until an anti-
good international presence with exports contributing to 30% of its revenues. dumping duty was levied on imported tyres in fiscal 2018.

Strong focus on R&D supports operating efficiency Competition from imports


• With the strong R&D capabilities, NOCIL has developed a new process for • The domestic rubber chemicals sector faces steep competition from imports primarily
production of a key intermediate and also set up and stabilised green field from China, and Korea. These players have an advantage of large capacities (in
excess of their demand) and government support. In view of significant injury to the
production facility in Dahej in fiscal 2014. As a result of this new facility at domestic industry as a result of dumping by these countries, the Government of India
Dahej the company reported significant improvement in its operating has levied an anti-dumping duty on import of such products in April 2014. The
efficiencies and operating margins in fiscal 2014. The company's R&D prowess benefits of the duty are available to the company till July 2019. Any changes in the
is also reflected in its large basket of 21 rubber chemicals as well as government stance post July 2019 can have an impact on the operating profitability
increasing contribution of value added products. of NOCIL and will be a key monitorable.

Robust Financial Profile Project risk


• NOCIL's financial profile is robust with networth of over Rs 800 crore as at • The company has been operating at near to full capacity utilization and considering
31st December 2017 and near debt free balance sheet. Given its healthy the favourable demand from end user tyre industry, has planned large brown field
business profile and favourable demand outlook the company is expected to capital expenditure of Rs.425 crore (about 50% of its estimated net worth) at Dahej.
generate annual cash accruals of about Rs.150 crore going forward.
WIP

STRATEGIC MOTIVES
WIP

EXPECTED SYNERGIES

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