Kinetic Engineering Preps For Comeback With Rs 177 Crore Investment

Kinetic Engineering Ltd., the maker of the iconic but defunct Kinetic Honda, has planned a comeback of sorts with fresh investments from promoters.

The Pune-based auto-components maker plans to issue convertible warrants worth Rs 177 crore with a conversion period of 18 months, according to a company statement issued on Tuesday.

Promoters Arun Firodia Trust and Jayashree Firodia Trust will invest Rs 160 crore to increase their shareholding to 70% by 2027 from 59% at present. About 93.5 crore new shares will be issued to them, bringing in their total holdings to 2.26 crore shares and the company’s total outstanding shares to 3.27 lakh.

The rest of the investment, about Rs 17.1 crore, will be raised from Transaction Square and Sai Geeta Penumetsa. About Rs 60 crore will come in by March 2025, followed by Rs 44 crore in fiscal 2026 and Rs 73 crore in the following financial year.

The idea is to become a Rs 1,000-crore enterprise by 2029, Ajinkya Firodia, vice chairman and managing director of Kinetic Engineering, told NDTV Profit in an exclusive chat after a media scrum on Tuesday. That’s 8-10 times growth in five years.

“An investment of Rs 180 crore is a lot of money for the next three years, and can definitely propel us from Rs 150-160 crore to Rs 1,000 crore,” he said. “The learnings are in the past. Now is the time to grow.”

The focus of the investment is to build the EV business under subsidiary Kinetic Watts & Volts Pvt. The company was set up in September 2022 with an initial investment of Rs 40 crore. Now, about Rs 100 crore out of the Rs 177 crore planned investment has been earmarked to make components for electric two-wheelers and three-wheelers.

Additionally, the investment will be used to service Rs 100 crore in new business from American Axle & Manufacturing Inc., Mahindra & Mahindra Ltd. and Renault SA. Also in the works is the installation of India’s first automatic nylon coating plant, a new assembly line for manufacturing chassis of two-wheelers and three-wheelers, and diversification into making non-automotive components such as gearboxes for solar panels.

“The focus is on both—Kinetic Engineering doing exports, building new technologies and the transmission business,” Firodia said. “Half of it (the investment) is in the EV business as that’s where all the growth is. So, we want to mix both and have a 40:60 ratio in favour of electric vehicles.”

Firodia is also exploring the battery manufacturing business.

“We are already setting up a battery plant at one of our group companies. We have tied up with one of the largest battery makers globally to design and manufacture batteries,” he said. “We will be inaugurating the battery plant next month.”

To be sure, the investment falls short of qualifying for a production-linked incentive scheme for the manufacturing of EV components locally.

“The PLI scheme requires a lot of investment—in thousands of crores, I think,” Firodia said. “But there are other government schemes we are interested in. We have applied for State GST benefits from Maharashtra. That should translate into 2.5% cost savings.”

Founded in 1972 by Ajinkya’s grandfather HK Firodia, Kinetic Engineering introduced India to affordable two-wheeled mobility with the Kinetic Luna. In 1984, the company—in a joint venture with Honda Motor Co. of Japan—launched the Kinetic Honda—India’s first scooter with electric start and gearless transmission. The companies parted ways in 1998.

In 2008, Kinetic Engineering formed a new joint venture with Mahindra as a minority partner. Mahindra, with 80% stake in the JV, acquired the two-wheeler manufacturing facilities of the Pune-based automaker and the brands on offer.

Since then, Kinetic Engineering has stayed away from making two-wheelers. Instead, it has focused on the auto components industry, supplying transmissions and drivetrains to the likes of Tata Motors, Mahindra, Force Motors, Ashok Leyland and Renault.

To be sure, the company hasn’t exactly been in the pink of health since it stopped making two-wheelers. The auto components business barely kept the lights on.

Kinetic Engineering was a loss-making enterprise until 2021, when its debt-to-equity ratio ballooned to 6.60. Revenue was a paltry Rs 80 crore.

Since then, however, the company returned to black and grew its topline to Rs 150 crore in fiscal 2024 from a little over Rs 80 crore in fiscal 2020. The debt-to-equity ratio has eased to 0.57. The operational profitability—earnings before interest, tax, depreciation and amortisation—has improved to 12% in fiscal 2024 from just 4% in fiscal 2020. The market capitalisation has grown in tandem to Rs 354 crore now from just Rs 23 crore in fiscal 2020. 

“In the last decade or so, we have turned around our plant. We have made it a profitable and growing company in auto components,” Firodia said. 

“Our debt-to-equity ratio is very much in control, and will reduce further. So, as we progress in building the company, if we need more money, we can approach the banks, and our financial partners. We would be open to that," he said.

“We have reached from a loss-making company to a net profit of about 4% and Ebitda of about 12%. Our target is that our Ebitda should be minimum 15-16%, maximum 20%. Net profit should be 7-10%.”

So, is the company now planning a re-entry into the two-wheeler space? Is the Kinetic Honda making a comeback in an electric avatar?

“I don’t know…,” Firodia said. “That will depend on what the people (board of directors) want to do, but it’s definitely a great idea.”