Carborundum Universal to acquire Silicon Carbide Products to expand global reach

Carborundum Universal Limited (CUMI), a leading materials sciences engineering solutions provider, has announced its decision to acquire a 100 percent stake in Silicon Carbide Products Inc. (SCP) based in Horseheads, New York, USA. The acquisition is valued at an enterprise price of USD 6.66 million (approximately INR 56 crore), with the transaction expected to close by the end of October 2024. The agreement was executed on 16 September 2024.

Carborundum Universal Limited plans to establish a wholly-owned subsidiary in the United States to serve as the Special Purpose Vehicle (SPV) for this acquisition. This strategic move is part of CUMI’s larger goal to bolster its presence in the ceramics and industrial refractories sectors by tapping into new markets in North America and beyond.

The Strategic Rationale Behind the Acquisition

Carborundum Universal Limited, part of the Murugappa Group, is leveraging this acquisition to access Silicon Carbide Products Inc.’s established market base and technological advancements in the ceramics industry. Sridharan Rangarajan, Managing Director of Carborundum Universal Limited, indicated that the acquisition aligns with the company’s strategic expansion plans, particularly in the power, steel, and mining sectors in India. He further elaborated that CUMI would benefit from SCP’s expertise in high-quality Nitride Bonded Silicon Carbide (NBSiC) products, which are renowned for their superior wear and thermal shock resistance.

CUMI aims to combine its capabilities with SCP to explore new synergies. The collaboration is expected to enable technology transfers, joint development of new products, and a broader product portfolio for both companies. Carborundum Universal Limited also sees potential in leveraging SCP’s nitriding furnace design, patterning, and tooling capabilities for critical thermal applications, which can significantly impact its business growth in power generation, petrochemicals, and non-ferrous molten metal transfer industries.

Carborundum Universal Limited’s Expansion Strategy

The acquisition of Silicon Carbide Products Inc. is set to bolster Carborundum Universal Limited’s competitive edge in the global market for ceramics and refractories. Silicon Carbide Products Inc., founded in 1994, is internationally recognized for its high-quality Silicon Nitride Bonded Silicon Carbide (NBSiC) products, offering unique solutions across multiple industries such as power generation, mining, petrochemicals, and material handling.

Joshua Dahlman, President of Silicon Carbide Products Inc., remarked that joining forces with Carborundum Universal Limited will enable SCP to grow its business with an expanded product portfolio and access to additional markets. This partnership is expected to lead to the development of newer products and expanded reach in both the US and global markets.

Expert Opinions on the Acquisition

Industry experts view the acquisition as a positive strategic move for Carborundum Universal Limited, allowing the company to expand its geographical footprint and technological capabilities. The integration of SCP’s expertise in NBSiC ceramics with Carborundum Universal Limited’s wide range of ceramic and refractory products is expected to drive innovation and growth for both entities.

Experts also suggest that this acquisition will provide Carborundum Universal Limited with a competitive advantage in the global ceramics market, especially in regions like North America, where Silicon Carbide Products Inc. has a well-established customer base. With SCP’s specialised production techniques and Carborundum Universal Limited’s extensive reach, the collaboration is likely to yield significant growth and operational synergies in the coming years.

Future Prospects and Market Impact

The acquisition of Silicon Carbide Products Inc. by Carborundum Universal Limited is expected to close by 31 October 2024, with no governmental or regulatory approvals required. The cash consideration for the acquisition stands at an enterprise value of USD 6.665 million, which will be subject to adjustments as agreed between the parties. The move is set to not only expand Carborundum Universal Limited’s footprint in the North American market but also reinforce its position as a global leader in ceramics and refractories.

Recent Stock Performance and Market Sentiment

Carborundum Universal Limited’s stock is currently trading at INR 1,502.90 on the National Stock Exchange of India as of 13 September 2024. Over the past six months, the share price has increased by 41.67%, and over the past year, it has grown by 26.03%. The stock reached a 52-week high of INR 1,841.15 and a low of INR 1,025.60. The significant rise in the share price reflects investor confidence in the company’s strategic moves, such as this acquisition, and its strong financial health.

Carborundum Universal Limited’s market capitalisation stands at approximately INR 28,603 crore. In the financial year 2023-2024, the company reported revenues of INR 4,702.2 crore, a 1% increase from the previous year, while its profit after tax (PAT) rose by 7% to INR 432.3 crore. The company’s robust earnings and strategic growth initiatives have contributed to the positive market sentiment surrounding its stock.

The stock’s price-to-earnings (PE) ratio is 62.01, indicating growth expectations. The recent acquisition of Silicon Carbide Products Inc. is viewed favorably by market analysts, who believe the integration will lead to new growth opportunities in the ceramics and refractories sectors, further enhancing Carborundum Universal Limited’s market position.

The acquisition of Silicon Carbide Products Inc. by Carborundum Universal Limited represents a strategic expansion that will enable the company to enhance its technological capabilities and global market presence. With strong financial health and promising growth prospects, Carborundum Universal Limited remains a key player in the ceramics industry, attracting both domestic and international investors looking for growth potential in industrial sectors.