Rama Steel Tubes Ltd to acquire Automech Group UAE

Rama Steel Tubes Limited ("RSTL") (NSE: RAMASTEEL; BSE: 539309), one of India's leading manufacturers of steel pipes and tubes, today announced its plan to acquire Automech Group, a UAE-based multi-award-winning provider of high-precision manufacturing services, machines, and components for a total consideration of AED 296 million (Approx Rs. 728 Crores). This strategic transaction marks a defining milestone in RSTL's journey to diversify into high-value engineering services and strengthen its presence across the GCC and MENA regions.

Financial Impact

Post-acquisition, RSTL expects consolidated total revenue to rise by over ~113% (FY27E postacquisition expected figures vs FY25 reported consolidated figure) from Rs. 1,065 crores in FY25 to approximately over Rs. 2,200 crores by FY27E, with EBITDA margins improving from ~4% to ~10%. Consolidated EBITDA is expected to nearly ~415%, from Rs. 46 crores in FY25 against expected Rs. 236 crores in FY27E (FY27E post-acquisition expected figures vs FY25 reported consolidated figure), driven by operational synergies and improved product-service mix.

Automech's standalone revenues are Rs. 611 crores and profit stood at Rs. 101 crores in FY25 (Exchange Rate 24.33 considered for conversion of AED to INR)

Positive impact on Rama Steel's standalone financials

In addition, this acquisition will give a significant boost to Rama Steel standalone financials by shifting part of the production chain from the Automech's UAE operation to Rama Steel IS domestic Indian manufacturing operation.

Further, Rama Steel's standalone financials will be boosted by proposed dividend and royalty payments from Automech to the parent, Rama Steel, once the operations are integrated.

Rama Steel also intends to institute world class Accounting and Governance practices at Automech, to ensure complete transparency and compliance with applicable laws.

This acquisition will also act as a significant launch pad for a global push by Rama, into the high margin, value added precision engineered products segment. This will mark the upscaling of Rama from a pipes company into a high-end engineering company.

Transaction Overview

Share Purchase Agreements have been executed among Mr. Jagjit Gouri (Seller), RST International Trading FZE (Buyer 1), and Rama Steel Tubes Limited (Buyer 2). RST International Trading FZE (UAE), a wholly owned subsidiary of RSTL, will acquire 78.38%, while RSTL will acquire 21.62% of Automech Group. The transaction is expected to close by 6 months, subject to customary approvals.

Acquisition Rationale

The acquisition will combine RSTL's strong manufacturing base 'Yith Automech's advanced capabilities in precision machining, heavy fabrication, marine services, and dewatering solutions. With Automech's API, ASME, and ISO-accredited facilities and ADNOC-approved vendor status, RSTL gains access to marquee clients and high-margin segments in infrastructure, energy, and industrial sectors.

Source : Equity Bulls

Keywords

RamaSteelTubes Acquisition AutomechGroup UAE