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Schneider Electric to acquire Luminous

Schneider Electric to acquire Luminous
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First Published: Wed, Jun 01 2011. 10 52 AM IST
Updated: Wed, Jun 01 2011. 10 52 AM IST
New Delhi: France’s Schneider Electric SA will buy 74% of privately held Indian inverter manufacturer Luminous Power Technologies Pvt. Ltd for around €215 million to boost revenue and market share in Asia’s third largest economy.
Schneider’s eighth acquisition in India since 2000 is likely to raise its sales in the country to more than Rs 4,500 crore, tripling 2009 revenue, said Olivier Blum, managing director, Schneider Electric India.
Luminous’ founders said selling a majority stake was essential for gaining the financial muscle needed to access global markets and ensuring the longevity of the name.
“People like us are very sensitive to ownership rights, so we must have had good reason to say ‘okay we are happy to give up our majority role, but we still want to participate’,” said Rakesh Malhotra, chairman of Luminous, who co-founded the company along with Navneet Kapoor and Sunil Bhalla 20 years ago.
“Our reason was that the company now needs access to global markets for scaling up; it needs the strength of a balance sheet to take sizeable risks on growth, and it needs to access a product and technology platform which will widen the offerings around the brand,” Malhotra said.
The decision to sell a majority stake stemmed from the belief that Luminous needed more than just cash.
“We realized that capital is not what was limiting us,” Malhotra said. “We decided to go against our emotional gut feel to do something which is more real and right... and make the company go into perpetuity, rather than limit it by what we could do for it.”
Schneider doesn’t look at the transaction as a regular acquisition, but one in which branding is important because Luminous products are sold in the retail market, according to Blum.
“You have to be very close to the Indian consumer; we needed to learn about India, and through a partner was the best way to do it,” he said.
The transaction was valued at 16 times Luminous’ 2010-11 earnings before interest, taxes, depreciation and amortization (Ebitda). India, the seventh largest market for Schneider’s products, contributed roughly 3.5% of global sales in the year to March 2010.
It currently operates in more than 100 countries, and reported global sales of €20 billion in 2010.
Luminous has significant market share in countries with an infrastructure deficit, such as Bangladesh, Pakistan and Nigeria. Its products include inverters for homes and small and medium-sized businesses, uninterruptible power supply (UPS) systems.
divya.g@livemint.com
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First Published: Wed, Jun 01 2011. 10 52 AM IST