Mumbai: Electrical equipment maker Havells India Ltd is looking to make large acquisitions in overseas emerging markets to enter new geographies and secure strong brands, a top company official said.
“We are not looking at very small acquisitions of Rs150-200 crore kind of companies, unless it is for technology,” said Anil Rai Gupta, chairman and managing director at Havells. The company will not return to developed markets and wants to focus on high growth opportunities in India and the emerging markets, he said.
In December 2015, Havells sold 80% stake in its international arm Havells Sylvania Malta BV—one of the top four lighting brands in Europe and Latin America—for Rs1,070 crore to Shanghai Feilo Acoustics of China. It also has an option to sell the balance stake in three years from the time of sale, or even earlier.
Sylvania was larger than Havells in 2007 when the latter acquired it. “For us, size is not that important but the strategic fit is important and that includes geographic, brand and distribution reach,” said Gupta.
Havells in the last year also restructured its go-to-market operations in India from a wholesale business model to retail to secure greater visibility and control over its inventory and sales. This meant a slight hit to its revenue growth during the year, which inched up 4% to Rs5,436.88 crore.
Gupta is now hopeful of the topline growing in double digits in the next two fiscal years.
Havells managed to hold on to sales even in November and December following demonetisation, said Gupta. “The effect was not as much as people were expecting,” he said, adding that his company benefitted as it took share from the unorganized market.
However, the prices of raw materials like copper are on the rise. Since 21 October, copper prices on London Metal Exchange have jumped 24.31% to $5736 from $4618.75 per tonne, according to Bloomberg.
Also, the domestic market is sluggish with key sectors such as power not gaining any traction.
“As the raw material prices increase, margins will be impacted and also the focus on domestic market could see its topline growth slowing down as the economic growth slows down,” said Ankit Soni, analyst, Karvy Stock Broking Ltd, who expects the impact of demonetization to stay for the next couple of quarters for Havells.