Havells Buys Lloyd Electric’s Consumer Division In Rs 1,600-Crore Deal
Havells India to get a foothold in air conditioners business.
Electrical goods maker Havells India Ltd. on Sunday said it is acquiring the consumer durables division of Lloyd Electric & Engineering Ltd. for an enterprise value of Rs 1,600 crore.
At the time of closing the deal, Havells will pay Lloyd Electric Rs 1,200-1,300 crore in cash and will either take Rs 300-400 crore debt on its books or pay lenders, Amit Rai Gupta, chairman and managing director of Havells India, told BloombergQuint over the phone.
The deal will give the maker of Havells electrical fans and switches a foothold in the competitive air conditioners segment, bringing it in direct competition with large players like Samsung Electronics, LG Corporation and Voltas Ltd.
The acquisition will be financed through a mix of internal accruals and debt, Gupta said.
After the divestment of Sylvania, we have a fairly healthy cash position on the balance sheet. We will augment that with a certain degree of debt. We are actually yet to finalise the exact quantum, but it could be Rs 500-700 crore of debt and the balance through our internal cash accruals. We will not be requiring any fresh equity and, thereby, no dilution during this process.Amit Rai Gupta, Chairman and Managing Director, Havells India Ltd.
Havells’ cash and bank balance stood at Rs 1,591 crore in the three months ended December 2016, the company had said in its investor presentation.
What Havells Gets From Buyout
Lloyd’s consumer durables division, which makes air conditioners, refrigerators and washing machines, reported a revenue of Rs 1,384.2 crore and Rs 105.6 crore in earnings before interest and tax for the financial year 2015-16.
Based on its run rate and past performance, Lloyd’s revenue for financial year 2016-17 is estimated at around Rs 1,850 crore with a projected EBITDA of Rs 110 crore, Havells said in a statement.
“Lloyd’s operating margins are in single digits as compared to Havells’... The business has the ability to get into double-digit margins,” Gupta said.
Over the last few years, Lloyd has grown quite aggressively through brand building and extensive distribution expansion, he said. “Now, they are at the cusp of utilising the strength of the brand and the product category,” Gupta said.
Lloyd already has a volume market share of approximate 12-13 percent in air conditioners and is among the top three players, Gupta said.
Havells earned 21 percent of its revenue from the electrical consumer goods segment for the financial year 2015-16, according to a presentation on the company’s website. Fast moving electrical goods contribute 25 percent to its total operating margin.
Nearly 40 percent of its revenue comes from cables, 24 percent from switchgears and 15 percent from lighting fixtures. The company has a 15 percent market share in the fans segment, 9 percent in water heaters and 2-3 percent in other electrical consumer goods.
Havells revenue for the nine months ended December 31, 2016 stood at Rs 4,425 crore and earned Rs 425.4 crore in profit after tax before exceptions.
The company expects the transaction to be completed in the next eight weeks subject to statutory due diligence.