Amber Buys Subsidiary for Book Value, Eyes Growth in Air Conditioning Market (No. 1)
Amber Enterprises acquires AmberPR Technoplast for book value. The deal is expected to streamline operations and increase business flexibility. Amber aims for a 25% revenue growth this year and has a positive outlook from analysts.
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Amber Buys Subsidiary for Book Value
Amber shares up on KRN launch
Amber Enterprises specializes in manufacturing comprehensive Room Air Conditioning (RAC) solutions with diverse specifications and ratings. The company also produces printed circuit boards (PCBs) and is in the process of expanding its capacity in this area. Following the successful market launch of KRN Heat Exchanger, investor interest in Amber Enterprises—an even larger player in the same field—has increased, leading to a nearly 5% rise in its share price during early trading on October 3.
Amber buys AmberPR Technoplast for book value
KRN Heat Exchangers has more than doubled in value since its market debut, achieving a market capitalization of approximately Rs 2,200 crore. In comparison, Amber Enterprises boasts a market capitalization of Rs 17,400 crore and has generated a year-to-date return of 64%.
Amber specializes in producing complete Room Air Conditioning (RAC) solutions with various specifications and ratings, as well as printed circuit boards (PCBs), and is in the process of expanding its capacity in this sector.
On October 1, Amber Enterprises announced an agreement with its subsidiary, AmberPR Technoplast, to acquire the business through a slump sale at its book value. The transaction is classified as a related party transaction and has been conducted at arm’s length, according to Amber Enterprises.
AmberPR Technoplast manufactures high-performance plastic components for automotive, electrical, and industrial applications. These plastic products are typically designed for precision applications requiring durability and design flexibility.
Amber expects business growth from acquisition
The agreement is anticipated to enhance operations and increase business flexibility at Amber Enterprises, with four main advantages highlighted for the deal:
1. Optimal resource utilization
2. Streamlining of business processes
3. Enhanced comparability with industry peers
4. Increased flexibility for expansion in the B2B sector
Amber Enterprises also announced in a separate filing that it will be meeting with investors and analysts on October 4.
The company aims for a consolidated revenue growth of nearly 25% this year, as stated during the June earnings call. The air conditioning industry experienced unprecedented demand in the June quarter due to an extended summer, recording over 35% growth in the first half of the calendar year.
Amber Enterprises reported a 50% increase in its RAC business, while its non-RAC segment grew by 39% in the same quarter. Additionally, the company has formed a joint venture to produce washing machines, with production expected to commence in the second half of 2024.
A recent note from Sharekhan indicated that India’s AC penetration is projected to rise significantly, with Amber’s volumes likely to achieve a 30% compound annual growth rate (CAGR) moving forward.
Global brokerage Jefferies reaffirmed a ‘Buy’ rating on Amber’s stock last month, forecasting a 19% upside potential.
KNR is reasonably valued given the growth and quality it provides in this niche market.
The IPO of KRN Heat Exchanger garnered an impressive investor response, being subscribed over 213 times for the Rs 342 crore offering.
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