Havells enters AC, washing machine space with Rs 1,600-cr Lloyd buyout

Deal marks its entry into air-conditioners, washing machines space

Havells India Limited, a leading electrical appliances and components company, on Sunday announced that its board has approved the acquisition of Lloyd Consumer Durable Business Division (Lloyd Consumer).

This acquisition, when completed, will mark Havells’ foray into the consumer durable industry. 

The acquisition is proposed to be executed at an enterprise value of Rs 1,600 crore on a debt-free, cash-free basis, subject to closing adjustments, the company said in a press statement. The transaction is expected to close in the next eight weeks.

The company has signed an agreement with Lloyd Electrical and Engineering Limited and Fedders Lloyd Corporation Limited for acquiring the Lloyd brand and the consumer durable business that is engaged in sourcing, assembling, marketing and distribution of consumer durables, including air-conditioners, television sets, washing machines and other household appliances. 

Havells will acquire the consumer business infrastructure, people, distribution network, including and not limited to absolute, exclusive ownership and right to all intellectual property of brand Lloyd, logo, trademark and attendant rights. 

It plans to finance the transaction through a mix of debt and internal accruals. The company would, however, not raise any fresh equity. Company executives said the acquisition might require the approval of the Competition Commission of India.

Anil Rai Gupta, chairman and managing director, Havells India, said that they would continue to use Lloyd Electrical’s production facility at Pantnagar in Uttrakhand. "In course of time, we will set up our own production facility that will be more modern," he told Business Standard.

The deal would mark Havells' foray into the consumer durables industry — currently estimated at $15 billion and growing in double digits with increasing urbanisation. The acquisition of Lloyd would give it access to 10,000-plus direct and indirect dealer networks spread across India, 485 authorised service centres and 31 com-owned service centres. 

Through Lloyd, Havells would be able to bring scalability to its consumer business, which currently accounts for nearly 21 per cent of the revenues. Cable and wires constitute 40 per cent of its revenue. Gupta said that the Lloyd portfolio would be a separate division. "The proposed acquisition is in line with Havells' objective of 'Deeper into Homes', driving domestic expansion and owning a brand and distribution oriented asset," he added. Havells' appliances business currently has products like water heaters, mixers, fans and air-fryers.

In January, Havells announced its entry into the personal grooming segment with the launch of an array of personal care products like electric shavers, beard trimmers, grooming kit precision nose and ear trimmer, hair straighteners and dryers.

Standard Chartered Bank was the financial advisor and AZB & Partners were the legal advisors to the transaction. EY represented the sellers as their financial advisor.

Havells' has been a growth story through acquisition. The late Qimat Rai Gupta acquired Havells in the 1960s and later made a mark by acquiring the beleaguered Sylvania, a 100-year-old brand, in 2007. Later in December 2015, it divested 80 per cent stake in Sylvania to Shanghai Feilo Acoustics Co Ltd for over Rs 1,070 crore.

According to the statement, Lloyd is among the top three brands in the air-conditioners category, with a well-entrenched national network in Tier I and II cities. The brand has expanded into television and washing machines as well. 

Fedders Lloyd was incorporated in 1957, in a strategic alliance with Fedders USA for residential air conditioning business in India. Now, the New Delhi-headquartered Lloyd group is into heating, ventilation, air conditioning and refrigeration, defence equipment and consumer durables. It has 17 manufacturing facilities in India. 

The revenues of the consumer durable arm, Lloyd Consumer, for nine months ended December 31, 2016, stood at Rs 1,242 crore. The earnings before depreciation, interest, taxes, and amortisation (Ebdita) stood at Rs 75 crore. Based on its run rate and past performance, full year revenue is estimated at Rs 1,850 crore with Ebdita of Rs 110 crore.