Havells acquires Lloyd Consumer for Rs1,600 crore

Consumer electrical goods maker Havells India Limited is set to acquire the consumer durables business of Lloyd Electrical and Engineering for an enterprise value of Rs1,600 crore, expanding its reach in India's Rs100,000 crore consumer goods market.

In a filing with the stock exchanges, Havells on Sunday said its board has approved the acquisition of Lloyd Consumer Durable Business Division (Lloyd Consumer) from Lloyd Electric & Engineering Ltd for an enterprise value of Rs1,600 crore.

With this acquisition, Havells will enter the white goods industry with Lloyd's range of air conditioners, televisions, washing machines and other household appliances.

Havells's current range of consumer appliances includes irons, mixer grinders and air coolers to name a few. In FY16, the company's consumer durables business accounted for 21 per cent of its overall standalone revenues of about Rs5,437 crore.

New Delhi-headquartered Lloyd, a 60-year-old diversified engineering group, saw its consumer durables business show up with revenues of Rs1,242.28 crore in the first nine months of the current fiscal (April-December 2016-17). In FY16, this segment had reported revenues of Rs1,384.22 crore.

 ''In light of the changing economic scenario and due to an increasingly competitive environment, the consumer durables business of the company has reached a stage where substantial growth capital would be needed to create and sustain further growth momentum.''

He added that it would not be possible for the company to invest further in its consumer durables business as it ''would substantially increase the leverage on the company's balance sheet and would involve a huge risk,'' Brij Raj Punj, chairman and managing director of Lloyd, said.

Lloyd's proposes to use the net proceeds of the sale to downsize its over-leveraged balance sheet and invest in its B2B (business to business) air conditioning business.

For Havells, the Lloyd acquisition is in line with its stated objective of penetrating ''Deeper into Homes'' of the consumer. ''This acquisition has, thus, given us an opportunity to serve our discerning consumers with a much wider range of products, both in electrical and electronic goods space,'' said Anil Rai Gupta, chairman & managing director, Havells India Limited.

Standard Chartered Bank was the financial advisor and AZB & Partners were the legal advisors to the transaction for Havells. EY represented Lloyd as the financial advisor. In Monday morning trade, the share price of Lloyd Electric & Engineering Ltd was down by 11.91 per cent, while the shares of Havells were marginally down by 0.87 per cent.