 "Consumer electrical major V-Guard looking out for acquisition")
Consumer electrical and electronics player V-Guard has assigned an agency to identify and evaluate potential companies for acquisition, as part of expanding its network and kitchen appliances business, which the company has entered last year. The company is also restarting manufacturing of stabilisers after almost three decades, said senior management official.
The company is looking at acquiring companies which are either in its current product category or some of the new product categories it has entered in recently, such as the Kitchen Appliances or adjacent categories. The acquisition would be either to fill a product gap or to increase its network capabilities, said Mithun K Chittilappilly, managing director of the company.
Commenting on the ticket size of acquisition, he said, "We may be looking at companies under Rs 500 crore revenue." The company currently does not have any debt in its book and there is around Rs 70-80 crore precash. There is enough headroom to borrow for the acquisition. Besides, the promoter family has around 66 per cent of equity and it is open to dilute the stake if it is required through a Qualified Institutional Placement (QIP).
"If the acquisition cost is Rs 300-400 crores, we may not dilute stake, we can borrow it," he added. The company last year posted a revenue of Rs 1850 crore and is expecting a growth to Rs 2,100 crore this year. It currently has around 500 distributors, 3,500 channel partners and close to 30,000 retailers, with major presence in South India.
Almost 30 per cent of its revenue is from wires and cables, 18 per cent from stabiliser business, 12 per cent from electric and solar water heater, 10 per cent from pumps and motors, 10 per cent from fans and 10 per cent from inverters and batteries. Almost one third of its revenue comes from non South markets at present and the company is looking at increasing it to 50 per cent over a period of time.
With seven manufacturing facilities across the country, the company is expected to commission two more facilities in Sikkim, for manufacturing of stabilisers and water heaters, with an investment of Rs 60 crore, before the end of the current financial year. The new facilities are aimed at reaping the tax holiday benefits in Sikkim and it would be after three decades the company would be starting to manufacture stabilisers on its own.
Once fully operational, 35-40 per cent of its stabiliser manufacturing will be from Sikkim plant. With the water heater facility, the company will reduce imports of certain types of water heater models.