Murugappa group company Carborundum Universal Ltd (CUMI) has initiated steps to wind down its German step-down subsidiary, CUMI AWUKO Abrasives GmbH (CAAG), citing continued underperformance and mounting losses.
The decision was approved by the Board of CUMI International Ltd (CIL), Cyprus, the holding company of CAAG, to proceed with a voluntary winding-up process under German laws.
Background of acquisition
CUMI had acquired the assets of Awuko Abrasives Wandmacher GmbH & Co. KG in February 2022 through its step-down subsidiary CUMI GmbH, Germany, as part of an insolvency proceeding.
Following the acquisition, the entity was renamed CUMI AWUKO Abrasives GmbH and operated in the coated abrasives segment, catering to wood and leather applications.
Persistent operational challenges
The subsidiary has faced sustained financial stress due to product and market limitations, coupled with intense price competition driven by global overcapacity.
Low capacity utilisation and inventory build-up further weighed on performance.
Cost pressures and market conditions
CUMI noted that geopolitical disruptions and macroeconomic challenges have significantly increased input costs, including energy, wages and other operating expenses.
Despite multiple turnaround initiatives, including cost optimisation measures, operational improvements and efforts to diversify revenue streams, the business has not shown signs of recovery.
Strategic rationale
The company said structural market challenges and elevated cost pressures have made the future viability of CAAG uncertain, prompting the decision to exit the business.
CUMI added that the subsidiary is not material to its overall operations and the closure will not adversely impact its core business.
Financial impact
The estimated financial impact of the winding-down process is expected to be in the range of ₹110 crore to ₹130 crore.
The company will complete all regulatory and legal requirements under German law before concluding the liquidation process.