Tega Industries' high-stakes Molycop buy targets global scale, fatter margins

Tega Industries is confident it can meaningfully lift group profitability through its Molycop acquisition, but margin expansion will take time and integration risks remain.

“We expect the acquisition to be earnings accretive between the second and third year,” Tega's MD and Group CEO Mehul Mohanka told CNBC-TV18.

While the Australia-headquartered Molycop currently operates at around 11% earnings before interest, tax, depreciation, and amortisation (EBITDA) margins, Tega is targeting 13–14% over the next three years. On a consolidated basis, the company expects to push margins closer to 18% over a three- to four-year timeframe.

Tega aims to grow Molycop’s revenues at 3.5-4% annually while targeting 15% growth for its own business, with consolidated net debt is expected to settle at 2–2.25 times EBITDA by the fourth year. The deal is expected to be earnings accretive between the second and third year.

The $1.48 billion transaction — nearly equal to Tega’s own market cap — will give the company a significantly expanded global footprint. But the deal also increases leverage in the near term, with Tega bringing in $118 million in debt and raising nearly $248 million through a mix of QIP and preference shares.

The promoter group will contribute $20 million, and its holding is expected to decline from 74.8% to around 64%.

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Kolkata-based Tega Industries, which designs and manufactures 'critical-to-operate' consumables for the mining, mineral processing and material handling industries, expects to reduce Molycop’s existing debt from $1 billion to $800 million, which could support interest savings and improve the group’s credit profile over time.

The company has been eyeing Molycop — a supplier of grinding media used in mining to crush ore and extract minerals like copper and gold — since 2017, but timing and fit aligned only now, Mohanka said.

Mohanka said the company will contribute about $361 million for a 77% stake in Molycop, while partner Apollo will fund the rest. “Both Apollo and Tega are going to be funding this transaction through a mix of equity and debt,” he said.



The company will launch a roadshow to reach institutional investors and high-net-worth individuals to participate in the fundraising.

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Tega's current market capitalisation is around ₹13,693.67 crore and its shares have risen 13% over the past year.

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