Havells' board approves the acquisition of Lloyd's consumer durables business; deal proposed to be executed on a debt-free, cash-free basis
New Delhi: Lighting and electrical appliances company Havells India Ltd on Sunday said it will acquire the consumer durables business of Lloyd Electrical and Engineering Ltd, run by the B.R. Punj Group, for Rs1,600 crore.
Havells signed the deal with Lloyd Electrical and Engineering and Fedders Lloyd Corp. Ltd, as some of the consumer durable brands are co-owned by the two companies promoted by the B.R. Punj Group.
Havells chairman and managing director Anil Rai Gupta said in a phone interview that the company will fund the transaction with internal resources and Rs600-800 crore of debt. The deal is expected to close in two months.
The consumer durables division of Lloyd Electrical, called Lloyd Consumer, is engaged in sourcing, assembling, marketing and distribution of products such as air conditioners, televisions, washing machines and other household appliances.
A statement by Havells said the acquisition is at an enterprise value of Rs1,600 crore on a debt-free, cash-free basis subject to closing adjustments. Any debt this division may have at the time of transfer as a going concern will be deducted from the transaction value of Rs1,600 crore. The acquisition covers consumer business infrastructure, people, distribution network and intellectual property relating to the brand Lloyd.
In the nine months ended 31 December, this division reported Rs1,242 crore revenue and Ebitda of Rs75 crore. Ebitda stands for earnings before interest, tax, depreciation and amortization, and is a measure of operating profitability.
Havells said that based on its run rate and past performance, full-year revenue is estimated at Rs1,850 crore, with Ebitda of Rs110 crore.
Gupta of Havells said that after the acquisition, Lloyd Consumer will be a division of the company, but its brand name will be preserved.
Standard Chartered Bank was the financial adviser and AZB and Partners were the legal advisers to Havells for the transaction. EY was the financial adviser to the sellers.
Havells is also in the process of adding personal grooming products to its product portfolio. Gupta said that will be accomplished through the organic growth of Havells’s consumer durables business.
The $15 billion consumer durables industry contracted 10.3% in the December quarter, compared to robust growth of 16.6% a year ago, according to official data. Experts attributed this to the impact of the invalidation of high-value currency notes from 9 November.
“Unlike in fast-moving consumer goods, a blip in sales does not necessarily suggest lost sales in the case of consumer goods, which are of high value in nature. It could indicate deferment of purchase to a future date. Consumer goods sales are likely to rebound in the coming quarters," said Pinakiranjan Mishra, partner and sector leader, consumer products and retail, EY.