Consumer electricals firm Havells is selling 80 per cent stake in its European lighting business Sylvania to Shanghai-based Feilo Acoustics for over Rs 1,070 crore.
The company will be carrying out the sale by divesting 80 per cent stake each in its two group firms -- Havells Sylvania Malta BV and Havells Exim Ltd, Hong Kong.
The combined equity value for 100 per cent stake for both the companies is Rs 1,340 crore (Euro 186 mn) and Havells has a cumulative investment of Rs 980 crore (Euro 140 mn), the company said.
Havells Sylvania Malta BV is valued at Euro 173 million and rest Euro 13 million for Havells Exim Ltd.
The stake sale is being conducted by Havells Holding Ltd, a wholly-owned subsidiary of the Noida-based firm.
"We have accepted Havells Holding Ltd's agreement to enter into a definitive agreement with Shanghai-based Feilo Acoustics Ltd to divest 80 per cent stake in Havells Sylvania Malta BV subject to shareholder and other approvals," Havells Holding Director Anil Rai Gupta said.
Feilo, a Shanghai stock exchange-listed firm is among top ten lighting company of China and has a market capitalisation of 1.8 billion Euro.
Gupta said: "Havells Holding would continue to hold remaining 20 per cent stake with an exit option in next 3 to 5 years."
In 2007, Havells had acquired Frankfurt-headquartered Sylvania through its Dutch subsidiary Havells Netherlands for USD 300 million.
Gupta said the sale will not include Sylvania's operation in Thailand, Chile, the US and Brazil, as the company is restructuring operations in these markets, which accounts for up to 8 per cent of Sylvania's total revenue.
He said these markets have been under performing in the last couple of years and their transfer to the Feilo group would take at an appropriate time in next 12 months after the restructuring.
The deal is in the best interest of Sylvania, which would have access to Feilo product categories and Feilo is also looking to enter into the lighting of Latin American and European cities, he said.
Gupta said the company will focus on the domestic and emerging markets going forward.
"Our main focus would be in India but we would look at the emerging opportunities in Middle East, African markets and South East Asia as well," he said.
Over utilisation of the fund available from the deal, Gupta said: "Havells balance sheet would be strengthened with the cash available. With this, more cash would be available which would open more opportunity to expand organic and inorganic opportunities".
Gupta further added: "Havells is always looking
opportunity to expand product portfolio both in domestic as well as international market."
Havells has also signed a strategic cooperation agreement with Inesa Group, the parent company of Feilo and also a state government company of Shanghai Government.
"Both the companies will establish a strategic group to explore and evaluate business opportunities in India, in the field of IOT (Internet of Things applications) and smart cities," he added.
Feilo is a strategic player in the Chinese lighting industry and now they would have a global footprint. Havells has a 50:50 JV with them in China for the last five years.
"Our relationship with this company is very strong and we would like to capitalise on the remaining stake so that we remain a strategic partner," Gupta said.
