Kedaara hires IndiaRF's Maheshwari to help turn around Sunbeam

Kedaara hires IndiaRF exec to help turn around its loss making autocomp bet Sunbeam

Kedaara Capital has hired Ashwani Maheshwari, formerly an operating partner at India Resurgence Fund (IndiaRF), a special situations fund sponsored by the Piramal group, people aware of the matter told Moneycontrol.

Maheshwari has been brought on board to help the PE fund turn around its lossmaking auto component manufacturing company Sunbeam Lightweighting Solutions, the people said.

According to Maheshwari's profile on LinkedIn, he became an operating partner at Kedaara in March.

Kedaara acquired Sunbeam, then known as Sunbeam Auto, from the Munjal family for about Rs 850 crore in 2018. Sunbeam makes aluminium die cast components for auto companies such as Hero MotoCorp and Maruti Suzuki.

Maheshwari joined IndiaRF in 2020 after a four-year stint at auto component manufacturer Varroc Engineering. His experience includes stints with BK Birla group companies Birla Tyres and Century Pulp & Paper, ITC and Tata Steel.

“At IndiaRF, Maheshwari was involved in working with CXOs of portfolio companies to implement new strategies and turn around businesses. He helped IndiaRF turn around Archean Chemical from a distressed company to a profit-making one and helped take the company public. He was closely involved with Setco Automotive, Panacea Biotec and Impresario,” one person said.

One of his main tasks at Kedaara will be to turn around the operations of Sunbeam, the person added.

Sub-par profile

Sunbeam has reported losses for several years even as Kedaara has tried to turn around the business by cutting costs and infusing additional capital.

Sunbeam reported a standalone loss of Rs 180.84 crore on revenue of Rs 1,578.76 crore in FY23, compared with a loss of Rs 184.56 crore in FY22 on a revenue of Rs 1,172.04 crore, according to the company's filings with the Registrar of Companies. Sunbeam reported a loss of Rs 111 crore in FY21 and a loss of Rs 69.13 crore in FY20, the filings showed.

Crisil noted that Sunbeam’s financial profile remains sub-par, with an increase in debt and a negative net worth, after adjusting for goodwill.

“The company’s financial risk profile continues remain sub-par for the rating, with debt level also increasing to Rs 528 crore in fiscal 2023 from Rs 483 crore in fiscal 2022, on account of capex and to support term debt repayments, further impacting the already weak debt metrics. Net worth remains negative after adjusting for goodwill. Interest cover ratio was also modest at 0.69 time in fiscal 2023 and is expected to be just under 1 time in fiscal 2024,” Crisil said in a report.

The company also has the pressure of repayment of outstanding non-convertible debentures worth almost Rs 300 crore, as of March 31, 2023. The NCDs were raised from wealth manager 360 One’s private credit funds - 360 One Income Opportunities Fund - series 2 and series 3, the RoC filings showed. The NCDs were issued in 2021 and 2022 and the money raised was used to refinance the company's existing debt.

Since FY20, Kedaara has infused Rs 373 crore of capital into Sunbeam to support its balance sheet, with the latest funding of Rs 140 crore in FY22, as per the Crisil report.

“Kedaara is also exploring options to onboard a new investor into the company. Kedaara too is expected to put in some more money into the company to help with any liquidity issues,” a second person said.

An email sent to Kedaara Capital did not elicit a response. 360 One declined to comment.

Diversifying customers

To be sure, Kedaara’s efforts to turn around Sunbeam have started showing green shoots lately.

“Sunbeam’s operating profitability improved to 3.3 percent in fiscal 2023 as compared to operating losses in fiscal 2022, mainly driven by the cost-correction measures undertaken and with increased volumes and realisation backed by the strong OEM demand. Operating income witnessed a healthy growth of 16 percent during fiscal 2023 as compared to 8 percent in fiscal 2022. Domestic revenues from the two-wheeler segment grew by 21 percent and 37 percent from the four-wheeler segment in fiscal 2023,” Crisil said.

Sunbeam’s continued focus on diversifying its customer base has led to its share of the two-wheeler segment declining to 60 percent of sales in fiscal 2023 from 66 percent in fiscal 2021, while the revenue share of the four-wheeler segment went up to 36 percent from 30 percent, it added.

Exports grew 33 percent to Rs 184 crore in FY23 (Rs 138 crore in FY22), with major growth in North America and France.

However, Crisil added that operating margins remained lower than those of most of its peers due to high employee costs and manufacturing expenses, which offset the benefit of cost-reduction initiatives.

“Net losses are expected to continue over the medium term, due to sizable, extraordinary expenses on voluntary retirement of employees, mainly at the Gurgaon plant,” it added.