(Metro Rail News): Sona BLW Precision Forgings Ltd. (Sona Comstar), a leading provider of global mobility technology solutions, has entered into a ₹1,660 crore agreement to acquire the Railway Equipment Division (RED) of Escorts Kubota Ltd. (EKL).
This acquisition not only increases Sona Comstar’s commercial value but also signifies its entry into the railway components market.
Mr. Vivek Vikram Singh, MD & Group CEO of Sona Comstar, mentioned “We are delighted to step into the railways components sector with the signing of the agreement to acquire the Railway Equipment Division of EKL. The proposed acquisition of the Railway Equipment Division aligns with our vision statement as we expand into the broader mobility sector. Once completed, the ‘Railway Equipment Division’ acquisition will enhance our clean mobility product offerings by adding a market-leading railway components business. The railway industry presents long-term growth opportunities, and with the ‘Railway Equipment Division’ business, we see significant potential to broaden our product range by incorporating advanced technology and engineered products”.
The transaction will involve the acquisition of RED as an operational entity through a slump sale. The Railway Equipment Division (RED) of Escorts Kubota Ltd. (EKL) is a well-known provider of railway components. It made INR 950 crore in revenue and INR 179 crore in EBIT in FY24. From the first year of operation, Sona Comstar should see an increase in earnings as a result of the acquisition.
Strategic Importance:
Given India’s growing railway infrastructure, fast urbanization, and rising investment in the industry, Sona Comstar’s debut in the Indian Railways Components market offers promising growth opportunities.
Brief about RED in the Market
With more than 60 years of experience in the field, RED has long been a reliable partner for private OEMs and Indian Railways.
It is the only domestic company with silver-grade IRIS certification for brake systems and one of the few in India that have various products certified by Indian Railways.
RED specializes in the design, development, and testing of several vital railway components and has a 600,000-square-foot plant in Faridabad.
Growth Dynamics:
HVAC systems, electrical control panels, vacuum evacuation systems, and automated plug doors are just a few of the new goods that RED is producing in large quantities.
The company is a market leader in India because of its wide range of products, which includes brakes, couplers, suspension systems, and friction and rubber goods.
Over the last five years, RED has demonstrated remarkable development, with sales rising at a compound annual growth rate (CAGR) of 19% and EBIT growing at a CAGR of 18%.
