Auto Alliance in Overdrive—Sundaram Picks Up a Strategic Slice of IMPAL

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Sundaram Finance Holdings Ltd (NSE: SNDA.NS) has approved the acquisition of a 4.99% stake in India Motor Parts & Accessories Ltd (IMPAL), strengthening its strategic focus on the auto business. This move is consistent with the company's investment strategy of remaining long-term, focusing on rising its presence in group-related companies.

1. Strategic Rationale

IMPAL is a leading player in the business of distributing auto components with a considerable presence in the south of India.
The transaction is expected to enhance Sundaram's exposure to the after-market automotive business segment, complementing its existing investment in companies like Brakes India, Wheels India, and Turbo Energy.
The 4.99% holding is regulatory compliant but will allow Sundaram to enhance control without triggering open offer obligations.

2. Group Synergy and Investment Focus

Sundaram Finance Holdings, a group focussed investment holding company, has an overweight portfolio in the automotive and allied segments.
The company has always looked to place value-accretive bets among the group universe by taking advantage of synergies between manufacturing, distribution, and financial services.

3. Market Outlook

The Indian auto sector is expected to see cyclical recovery, and therefore, the investment in IMPAL is considered a timely bet on aftermarket growth, especially among Tier-II and Tier-III cities.
The action is viewed by analysts as boosting dividend yield and growing long-term capital appreciation for Sundaram's shareholders.

Sources: Sundaram Finance Holdings, Investing.com