Mumbai: When a Kolkata company hits the pink press headlines, for the biggest buyout by an Indian enterprise in three years, it is 'breaking news' indeed. After all, the City of Joy might well be known for its culture and cuisine, but hardly for commerce.

But last week, Tega Industries announced it would buy Molycop, a 100-year old, grinding-media multinational. On face value, the deal looked full of ambition - even if in a consortium with one of the biggest Wall Street investors.

First the brass tacks

Led by Mehul Mohanka, MD & Group CEO, second generation in the business, Tega and Apollo Global Management have signed a binding bid to buy US- based Molycop from its current owners, American Industrial Partners (AIP), for an enterprise valuation of around $1.48 billion.

Under the proposed structure, Tega will hold roughly 77% of the special-purpose vehicle used for the deal and Apollo funds about 23%. The purchase price reflects a multiple of ~8.6x FY25 EBITDA ( EBITDA of $172 m ), less than a third of Tega’s own multiple - which trades at a lofty 25x EBITDA (TTM), and 3.0x-5.0x lower than many of the other consumables peers like Weir, Metso, Orica and FLSmith.

But this audacious attempt by a home-grown mid cap company to go out shopping for one of the world’s largest mining equipment companies should unearth a far richer story than what the plain numbers reveal. It should also nudge investors to rethink how one can get exposure to the industrial backbone of electrification and the green economy -- the miners, mills and the consumables that make them run – and get outsized returns.

Grinding Media Leader

Molycop is the market leader in supplying grinding media: the steel and high-chrome balls and rods that wear away ore in SAG and ball mills, that crush and grind raw metals like iron and copper ore, gold, bauxite etc into pure concentrates. For global miners like BHP Billiton, Anglo American, Barrick or Newmont these are mission-critical consumables. They are bought under long-term contracts, wear out predictably, and get replaced on a schedule set by throughput and ore characteristics.

For miners, downtime costs far more than the price of the balls themselves while for vendors, that means sticky customer relationships, predictable revenues and high visibility.

As per its own presentations, it serves 400+ mines (especially gold and copper) in 40 countries, with decade-long average customer relationships. More importantly, it isn’t impacted by cyclicality of metal prices but is really driven by volume growth in these sectors, consistent over the past 40 years.

Cash Flow Regularity

Put the product and the market together and a picture emerges: as the world pushes to electrify transport, scale renewable grids and build AI-heavy infrastructure, copper demand is structurally higher. More ore processed means more grinding media consumed making it a durable deal that underpins modern economies. The Molycop franchise sits square in the middle of that flow.

The combined company is presented as a complementary pairing: Tega’s mill liners, chutes and material-handling consumables paired with Molycop’s grinding media, technology stack and deep distribution network would create a nearly end-to-end offering inside the heart of any mine. Tega’s presentation shows a pro-forma entity with $1.73bn of revenue and $217m of EBITDA, significant in many ways.

The repetitive nature of the target company’s business and an operating footprint located near mines reduce commercial risk and create predictability in cash flow. Tega has factored in $20 million savings in cost and operating expenses over 2 years and a combined $100 improvement in combined revenues over 3 years. “There will be no increase in fixed cost. The accretion in gross margins will get passed through directly to the EBITDA,” Mohanka (50) told ET.

Buying the market leader in a new segment to diversify the portfolio is one thing. With Molycop, Tega gets to flex its operational muscle further building on an adjected product while expanding its global manufacturing footprint. Currently 85% of its revenues come from outside of India across 96 countries.

Like all leverage buyouts (LBO) there are risks involved. Tega must raise equity of around $248m and non-recourse LBO debt at the Molycop level. Further, it will need to execute a complex integration across multiple regions.

Still, Mohanka retains operational control with a 77% economic stake of the special-purpose vehicle used for the deal. Apollo funds will own about 23% and be a capital and governance partner. Back in 2017, AIP had suggested a merger of Tega and Molycop, but that would have diluted Mohanka significantly. Now, he gains access to deep private-markets expertise but keeps his team and operational DNA intact. Further, using non-recourse debt reduces the risk on the overall business.

Tech-tonic Shift

Molycop has also been investing in diagnostics, mill-sensing and optimisation tools; so additional software and analytics investment will help sell “performance” as well as product. Selling mills along with the balls can allow for selling a solution versus tonnage. If the combined group can cross-sell digital services that improve throughput and lower total cost of ownership for miners, pricing power and margins could expand materially.

“Lining and grinding has always been complimentary,” Mohanka told ET. “But Molycop has built up a technology platform using AI, machine learning that optimises efficiency and operations for customers. This is an amazing opportunity to leverage upon as a solutions offering.”

For investors who prize steady cash flow and sectoral leverage to infrastructure, Tega has shown the tunnel to play the commodity backbone of the next decade. This is not a leverage-heavy punt on a cyclical commodity price but a bet on the consumables that make mines run and the technology that makes them run even better as demand for critical metals accelerates from electronics, solar industry and semiconductors.