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Industrial Group specialized in Managing High Value Added Processes 1
MAHINDRA CIE AUTOMOTIVEJune 2013
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Table of Contents
Rationale for the Alliance3 Introduction to CIE Automotive & Systech
4 Key Transaction Steps
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CIE Automotive + Mahindra Global AllianceOverview
CIE Automotive, Spain and Mahindra & Mahindra (M&M), India enterinto a lobal Alliance in the automotive com onent business
CIE Automotive, through Autometal, to invest in automotive component businessesof M&Ms Systech Sector (Mahindra Systech)
o nves n u omo ve pa n
Merge of all automotive component companies of Mahindra Systech and CIEEuropean Forging companies into an India-listed automotive supplier creatingMahindra CIE Automotive that consists of
Mahindra Systechs automotive components business (FY13 Sales EUR 575 Mn)
with operations in India and EuropeCIEs European Forgings business (CY12 Sales EUR 150 Mn) with operations inS ain and Lithuania
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*CY2012: Jan 2012-Dec 2012 / FY2013: April 2012-March 2013
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CIE Automotive + Mahindra Global AllianceSchematic Representation
CIE Automotive
Mahindra Systech
Autometal
CompositesForgings GearsMachining
Forging*Brazil
Forgings, MachiningCastings, Stampings,Plastics, Painting
StampingsCastings Aluminum
Plastic
Mexico Aluminum, Forgings,Machining, Stampings,Plastics, Painting
Mahindra CIE Automotive Limi ted
USA Plastics
Bio Fuels
Inf. & CommTech.
Indicates transaction
* CIE Forgings plantsin Spain & Lithuania
China Forgings
Note:Mahindra S stech is not a le al entit
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Listed company
All companies, listed or unlisted, will be merged into Mahindra
Forgings Ltd. to be renamed as Mahindra CIE Automotive Ltd
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Table of Contents
Rationale for the Alliance
3 Introduction to CIE Automotive & Systech
4 Key Transaction Steps
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Industry structure
As industry consolidates via acquisitions/partnerships, global presence is key
60
30,000
M s 1
N
40
20,000
o t i v e
O m b er
o
2010,000
o f A u t o s u
p pl i
9 5 0
9 5 5
9 6 0
9 6 5
9 7 0
9 7 5
9 8 0
9 8 5
9 9 0
9 9 5
0 0 0
0 0 5
0 1 0
0 1 5
0 2 0
N u m
b e r
r s
Supplier consolidation is faster than OEM consolidation
1 1 1 1 1 1 1 1 1 1
Source: Boston Consulting Group, E&Y
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Global presence (emerging + developed world) becoming key for suppliers
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Strategic positioning in highgrowth markets
Annual Vehicle production: Period 2012 2017 (Mn units.)
19
222,4
4,34,0 98
2,1
3,7
,
3,22,9
80
2012 2017E2012 2017E2012 2017E
In 2013 year isexpected aweaker marketwith medium term
Growth in 2013Eby 4%. SofterMedium termrecovery
2013E Growth by4%. Growingfuture prospectscontinue
2013E Growthby 9%.
Growing futureprospects
2013E Growthby 9%.
Growthcontinue year
2013E Growthby 2%.
Growthcontinue year
Source : Vehicle Production, CSM March 2013Growth % : CAGR (Compound Annual Growth Rate)
.
CIE Automotive bet is to increase its resence in Mexico
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and settle in India
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Why India?
In Asia we are committed toINDIA
Significant growth in the coming years.
,
and export.
or ea er n eavy e c e n us ry.
.
A country with great opportunity to lead the growth in the
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region (Indonesia, Thailand, etc.).
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Transaction impact
For in s Stam in s Castin s
CIE Automotive Mahindra Systech
Machining, Plastics, Paintings,
AluminumSegments org ngs, as ngs, ompos es,Stamping, Gears
Customers
Nafta Mercosur Euro e China India and Euro e
Russia, Morocco
Amongst top European, BrazilianMarket Leader in India crankshafts (Car+UV) groupsPosition Leader in Heavy Vehicle Forgings (Europe) Amongst top 7 Indian auto comp groups
. (CY2012*)
(EUR Mn) (FY2013*)
*CY2012: Jan 2012-Dec 2012 / FY2013: April 2012-March 2013
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mongs op au o componen s groups g o a y
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Complementary product market presence
Process EU NAFTA Brazil Russia India China
amp ngs
Forgings (1)
Machining (2)
Plastics
AluminumCastings
a n ng
Roof Sys.
Magnets
(1) Forgings in EU largely complementary CIE serves car markets while Systech
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CIE Presence Systech Presenceserves CV market(2)Gears/ Machining complementary Systech manufactures gears while CIEmachines other components
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New forging powerhouse underAutometal management
Forgings Europe
Forgings Nafta
Forgings India
Forgings Brazil
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Creation of a major forging group with global footprint
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Diversifying into new high growthmarkets
Asia
Europe Asia
Europe America
America
Sales 2012 Sales 2017
Consolidating a significant market share in the Asian market,continuin with the strate of emer in markets rowth
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Diversification bringing less volatility tocash flows
Diversifying financial markets
Three different vehicles to invest in the Auto sector:CIE Automotive: Global market investment
Autometal: Investment in emerging marketsMahindra CIE Automotive: Investment in Asia and GlobalForgings
Highest standards of corporate governance in each market
Diversifying finance: raising where cash flows are generatedBanks
Relationships with global and local banks in every region
Global access to debt capital markets
and Debt
Markets
Diversification and transparency of being listed
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compan es mproves cre qua y
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Alliance with a partner that has aperfect match
CIE Automotive & Mahindra groups have similar values &focus areas
Focus on financial returns
Stron or anic & inor anic rowth
Multi - technology
Decentralized (local) decision process
Independent business unitsJV / Acquisition Focus
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The transaction in numbers
Integration of a Group of companies with a recurrent level (1) of:Revenues: EUR 650 MnEBITDA : EUR 66 Mn
Net financial debt: EUR 170 Mn
The transaction is mainly cash neutral at CIE Automotive level:Cash paid for equity acquisitions for Mahindra stake in Systech companies isreinvested by Mahindra into CIE Automotive shares (13,5%)Only cash out comes from tender offers: aprox EUR 25 Mn (2)
CIE Automotive Group merges its European Forgings into Mahindra CIE
As a result CIE Automotive Grou holds 51%~ 53% (2) and Mahindra 20%of Mahindra CIE
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(1) Recurrent level figures: Proforma calculated at normal 2011 market levels in Europe and India
(2) Depending on the tender offer acceptance
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Thoughts on value creation
BENEFICIAL FOR ALL SHAREHOLDERS
CIE Automotive has proven financial performance over last 16 years with domain knowledgein automotive components business, in all different geographical areas.
CIE Automotive, with successful track record of M&As, has also proved its integrationcapacity, improving margins of integrated companies and creating value for shareholders.
Europe. Indian operations are on the cusp of upturn.
Mahindra CIE will also have access to other geographic markets where CIE has presence.
M&M continues to be a strategic investor in auto comp business with 20% stake in MahindraCIE and 13.5% stake in Spain at parent level.
anagemen s o e a ance w e a gne opera ona y an s are o ers are a gnestrategically.
Together, the alliance becomes close to EUR 2,2 Bn and fulfills M&Ms & CIEs ambition to
Industrial Group specialized in Managing High Value Added Processes 16
be a global player in this business.
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Table of contents
Rationale for the Alliance
3 Introduction to CIE Automotive & Systech
4 Key Transaction Steps
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Overview of CIE Automotive
Company Overview Financial Summary
subsidiary listed in Brazil
Key business areas include forgings,
Sales 1,591 1,840 1,647
EBITDA 193 234 224, , , , Aluminum and painting.
Locations - Europe, Brazil, Mexico,USA China Russia Morocco
marg n . . .
PAT 41 61 61
Net Debt 507 342 394
Shareholding Pattern of Corporate Structure
*CY2012: Jan 2012-Dec 2012 / FY2013: April 2012-March 2013
Gestamp
T.S.10,0%
CIE(Spain )
Sales: EUR 1,647 MnEBITDA: EUR 224 MnMarket Cap: EUR 659Mn
Key businesses: Aluminum,Forgins,Castings,Stampings,
,
Management Team /
Family OfficeInstitutions
Free float 21,5%
ac n ng,Plastics.Non key businesses:Biofuels,Info & Comm Tech
75%
Sales: Eur 641 MnEBITDA: Eur 108 Mn
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24,4%18,5%(Brazil) Market Cap: Eur 978Mn
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Overview of Systech auto components
Business Overview Financial Summary
(~80%)
FY13 Sales of ~INR 40,000 mn / Euro580 mn
mnSales: India 13,364 18,231 18,413
Sales: Europe 22,448 26,488 22,175 19 Manufacturing facilities in 4 countries
55% of revenues from Europeanoperations
Sales: India 191 260 263Sales: Europe 321 378 317*1 Euro = INR 70.0
Sales by Business Corporate Structure
*CY2012: Jan 2012-Dec 2012 / FY2013: April 2012-March 2013
Forgings / 55%
Others / 4% Systech Sector
Gears / 13%
Auto Components ee
Eng. Services
Aerospace
Listed:ForgingsStampings (part of MUSCO)CompositesPrivate:
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Castings / 9%Hinoday (Castings + Magnets)Gears Not Part of Transaction
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CIE Automotive performance
Profitable growth history over 10 years; successful trackrecord of 50 M&As
Sales Evolution (EUR Mn) EBITDA Evolution (EUR Mn)
RoCE (2) 15,5% in 2012RoCE (2) 15,5% in 2012 Auto EBITDA margin of 15,8% in 2012Auto EBITDA margin of 15,8% in 2012
CIE Automotive s growth and profitability trend keeps in double digit rates,
(1) 2006 to 2011 data deducting turnover of diesel oil used for blending(2) ROCE calculated as EBIT divided by average employed capital (equity + net financial debt)
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av ng reac e an op ma ac v y an eve an a recor e
Result in its history
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CIE Automotive unique positioning
Tier 1.5 : Supply parts to OEMs and Tier 1
Business Characteristics
Excellent relationship and penetration with all OEM and Tier 1customersStrong Commercial
Relationships
Track record with over 50 new integrations in the last 10 year ona global scaleGrowth Fuelled by
Al liances & Joint Ventures
Lean and robust procedures with effective cost controlEmphasis on CorporateCulture of Productivi ty
Products serving global platforms and local customer needsProduct Portfolio
R&D in multiple technologies as a differentiating factor offeringbroad growth potentialMulti-technology Portfolio
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ver me as een a e o ac eve g er marg ns an eindustry average
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Table of contents
Rationale for the Alliance
3 Introduction to CIE Automotive & Systech
4 Key Transaction Steps
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Transaction structure (STEP 1)
CIE Automotive, through Autometal, to purchase stake in MFL,MHIL, and MCL from M&M
M&MCIE 75%
MahindraForgings
(Spain )
Autometal(Brazil)
arePurchase +Open Offer
Mahindra
SharePurchase +Open offer
72%
Mahindra
(Spain)
SharePurchase
28%
HinodayIndustries
AssetInte ration
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CIE Forgings
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Transaction structure (STEP 2)
Mahindra CIE Automotive is created
M&M CIE Automotive
~20%
~75%
.
72%
28%
Autometal~[51]%
(Spain)
a n ra u omo ve
Limited*
Merger Mahindra Forgings
(Europe)
MahindraComposites
Mahindra
Investments
Mahindra
GearsMahindraHinoday PIA 3MUSCO .
Mahindra Gears &
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*Erstwhile Mahindra Forgings Limited
Transmission India Ltd. (India) o rg ngs
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Swap ratios
Mahindra Hinoday 1.10
a n ra ompos es .
Mahindra Gears Europe 0.17
Mahindra Gears India 0.20
MUSCO 2.84
CIE Forgings 1.05
*Swap ratios are based to 1 share of Mahindra Forgings Limited
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i d i li f i d
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Estimated timeline for transaction andregulatory approvals
Event Estimated Dates
Transaction Signing [June 15, 2013]
Closure of Open Offer [Oct, 2013]
Receipt of High Court Approval [April, 2014]
Regulatory approvals
Bundeskartelamt, Germany (Anti-Trust Authority)
SEBI Clearance for the Letter of Offer (Open Offer)
High Court and shareholders approval for the merger
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Advisors
Legal Advisors
Manager of the tender offers
Independent valuers providing SwapRatios for Merger
NM RAIJI
Independent valuers for the capitalincrease in CIE
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