Garg Furnace Limited to acquire major stake in Vaneera Industries, targeting growth in alloy steel and fasteners markets

Garg Furnace Limited, listed on the Bombay Stock Exchange, announced on September 7, 2024, that it would acquire a majority stake in Vaneera Industries Private Limited. This decision, aimed at expanding into the alloy steel and screws & fasteners sectors, could significantly alter the company’s market positioning and profitability. The announcement came after market hours on September 6, 2024, when Garg Furnace Limited’s share price closed at INR 377.00, up by 0.37% (+1.40 INR).

Garg Furnace Limited’s Strategic Expansion

Garg Furnace Limited revealed its plan to acquire at least a 51% equity stake in Vaneera Industries Private Limited, making it a subsidiary. This acquisition is part of a larger strategy to diversify and grow in sectors with high-profit margins. The company’s share price on September 6, 2024, before the announcement, was INR 377.00, reflecting a positive sentiment even before the news was released. Market analysts predict a favorable reaction as this acquisition aligns with the company’s efforts to drive growth in high-demand markets.

New Focus on Alloy Steel and Fasteners

Vaneera Industries is setting up a state-of-the-art manufacturing facility for alloy steel production, utilizing advanced techniques such as Electromagnetic Stirring (EMS), Ladle Refining Furnace (LRF), and Vacuum Degasser (VD). This facility, with a planned capacity of 204,000 MT per annum, will cater to specialized industries like automotive and engineering. The first phase is set to commence in October 2025.

In addition, Vaneera Industries is developing a facility to manufacture self-drilling screws under the “TAGIT” brand, aiming to capture a significant share of the domestic market by replacing imports. Production is expected to start in November 2024, with expansion plans already underway.

Impact and Market Reaction

Devinder Garg, Chairman of Garg Furnace Limited, stated that this acquisition would enhance the company’s profitability through the production of high-value products like alloy steel and self-drilling screws, which serve as import substitution products. He also noted that the government’s recent ban on low-cost screw imports would support this strategy, driving growth in local manufacturing.

The company’s financials for the quarter ending June 2024 showed a revenue of 623.28 million INR, up 0.94% year-over-year, and a significant increase in net income by 205.59% to 15.64 million INR. These results, combined with the recent acquisition, are expected to boost investor confidence and potentially increase the share price.

Potential for Sustainable Growth

Experts believe that this strategic move could propel Garg Furnace Limited into a new growth phase, leveraging advanced technology and favorable government policies. The acquisition is not just a diversification strategy but a calculated step to enhance market share in specialized manufacturing sectors.