Not all acquisitions deliver positive outcomes. That is the bitter reality. Hence, for investors, it pays to look beyond the news to evaluate what the emerging possibilities could spell and whether there is a great deal of value creation that could stem from such a move. We looked at numbers—because these speak louder than words—to gauge where Minda Corp and Pricol stand today and the possibilities for the future.

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MINDA CORP’S UNINSPIRING PAST

Minda Corp has been a clear underperformer over the past 10 years compared to its peers. While Sona BLW has grown its sales 6.8x over the past 10 years, UNO Minda 5.7x, Sundaram Clayton 2.8x, and Endurance Tech 2x, Minda Corp has seen its revenues rise just 1.3x.

Even on the profitability front, its EBITDA margin is the weakest among the set and its operating cash flows are poorer. This raises the question of whether Minda Corp is a great choice to back to take over and lead a new business.

To be fair, Minda Corp has seen some improvement in its near-term performance. But how much weight should you ascribe to that remains the big judgement call.

Also Read: A look at how India's latest hostile takeover battle is playing out

POSITIVE SIGNALS FROM PRICOL

Pricol’s revenue trajectory has been far from inspiring since FY17 (after it amalgamated its Pune arm), with sales staying ranged between Rs 1,500 crore and Rs 1,900 crore. That is clearly a red tick. However, since 2019 when it incurred an EBITDA loss, there has been a clear and secular improvement in profitability. And this trajectory continues into the nine months of the current year. So, is Pricol on a growth path now? That’s quite possible.

Pricol showcased its range of EV-ready products at the Auto Expo 2023 and it was recently recognised with a Top 50 Innovative Companies award by the CII. It claims its portfolio is now EV agnostic and that could spell resilience in the midst of an industry transition.

This is also perhaps what makes Pricol attractive to a player like Minda Corp looking to play catch-up with its now larger peers. But is Pricol better in the hands of Minda Corp or is it better off being managed by the current team? That’s the big call institutional investors will need to take, without of course ignoring the profit-making opportunity an irrational spike in valuations a tussle might offer.

A GOOD YEAR SO FAR

Both Minda Corp and Pricol have had a good nine months in the current fiscal year. Can the good times continue remains the big question. Minda Corp claims to have grown far ahead of the industry, while Pricol has managed to maintain its long-term zero debt status for another quarter.

Also Read: Pricol MD Vikram Mohan says key institutional investors are 'firmly backing' company | Interview

SYNERGIES & BENEFITS

While Minda Corp, if it at some point wrests control of Pricol, stands to gain from the addition of a strong portfolio of products, including acquiring greater clout in competing segments, a failure to do so could prove an expensive adventure.

For Pricol, it doesn’t seem like there is too much to gain on the face of it, as it has a list of marquee clients already as customers, and if its future is truly promising, raising capital should not pose much of a problem.

The big question, therefore, remains around the ability of present or future management to make a material difference to the business trajectory. And that remains a tricky one to call for the moment.

As a long-term investor, I’d rather back a company with proven credentials and a clear growth path in place. And neither of the two companies in question has attained that confidence yet.

Also Read: Pricol MD says no intention to sell stake, no synergy in working with Minda