More than 70% of the acquisitions fail. With that as the base rate, the acquisition of Heubach is going to be challenging for Sudarshan. Added to it, the acquisition is going to be funded partly with debt. And more money will be required to be infused into operations of Heubach. All this will add to the challenges and leverage of Sudarshan.
The base business of Sudarshan is also averaging only 14-15% pre-tax ROCE which is not great. It might be the 3rd largest pigment player globally but it doesn’t seem to have high bargaining power with the customers.
And current valuations are nose bleeding. More than 50 PE
A medicore base business, a large acqusition which is more likely to be tough than easy, the prospects of leverage clearly going up. And such high valuations. What am I missing ?
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