Havells will enter AC, washing machine space with Rs 1,600-cr Lloyd buyout - household electrical appliances

Havells India, a leading appliance and parts company, is buying the consumer durables division of Lloyd electrical engineering.
The name of the company is Lloyd's consumer durable goods division.
Mr Haveles said on Sunday that the board had approved the plan.
After the acquisition is completed, it will mark Javier's entry into the consumer durables market.
The proposed business value of the acquisition is Rs 1,600 (Rs 16 billion)free and cash-
The company said it had a free base but needed a close adjustment.
The deal is expected to end in the next eight weeks.
Standard Chartered is the financial advisor to the transaction and legal counsel for AZB & Partners.
EY acts as their financial advisor on behalf of the seller.
Havells has signed an agreement with Lloyds electric and fedes Lloyd to acquire the Lloyd brand and its durable consumer goods business
Purchase, assemble, market and distribute air conditioners, televisions, washing machines and other household appliances.
Havells will acquire the entire consumer business infrastructure, people and distribution network.
In addition, all intellectual property rights of Lloyd's brand, logo, trademark and accompanying rights.
It plans to finance transactions through a mix of debt and internal accrual.
The company will not raise any new equity.
Executives say the acquisition may require approval from the Indian Competition Commission.
Lloyd's consumer income for the month of April 9-
1,242 rupees (12 rupees) in December 2016 ). 42 billion);
Operating income is Rs 75 (RS 0. 75 billion ). The full-
Annual income is estimated at Rs 1,850 (Rs 18 ).
5 billion), operating income of Rs 110 (Rs 1. 1 billion).
Havells India, chairman and president of Anil Rai Gupta, said they would continue to use the production facilities of Lloyd Uttarakhand pantangar.
"Over time, we will build more modern production facilities.
"The consumer durable consumer goods industry is currently estimated at $15 billion (Rs 1) and is growing at double digits each year as urbanization develops.
The acquisition of Lloyd will give Havells 10,000-
485 authorized service centers and 31 companies, as well as a network of direct and indirect distributors
Own service center.
Javier's consumer business is currently close to its revenue;
Cables and wires account for 40 per cent.
The Lloyds portfolio will be a separate division, Gupta said.
"The proposed acquisition is in line with Javier's goal of" going deep into the family "to drive domestic expansion with brand ownership and distribution --oriented asset.
Last month, Havells announced its foray into personal beauty with a range of products such as electric shaver, beard trimmer, beauty sleeve precision nose and ear trimmer, hair straightener and hair dryer.
Havells has been a growth story through acquisitions.
The late Qimat Rai Gupta acquired it and built it in the 1960 s.
He later bought the struggling 100-
Brand in 2007.
On December 2015, the company sold Sylvania's 80 stake to Shanghai feiluo sound company for 1,070 rupees (10 rupees. 7 billion).
According to the official statement, Lloyd is one of the top three brands in the air conditioning category, in the first-I and tier-II cities.
The brand has also expanded to TV and washing machines.
In the long run, the acquisition of Lloyd Electric's durable consumer goods business will be a huge acquisition.
First of all, given that Lloyd's market share in the air-conditioning industry is 12, it provides the necessary opportunity for Javier to enter the field of white appliances.
In addition to some other consumer goods, Lloyd also produces television and washing machines.
The acquisition is also a core business in Javier --switchgears -
There are problems in quantity and profitability.
While havells's cable business is still strong, it offers limited opportunities for diversity.
After the acquisition, Havells can scale up to meet all aspects of consumer durables.
Whether Havells paid the right price for the deal is a street concern.
Analysts expect shares in havells to open in negative territory on Monday as valuation issues arise, mainly due to margin
The depletion of transactions.
Javier's consumer business currently has a profit margin of 24, while Lloyds has a profit margin of 7. 7 per cent.
Even Javier's overall operating margin (13%) is much higher than Lloyd's.
As a result, the profitability of Havel is likely to decline significantly.
For the nine months ended December 2016, Havel's consumer business income was RS 1,023, while Lloyd's consumer business income was RS 1,242 during this period.
In a simple calculation, the combined business profit margin will reach 15.
In addition, analysts at Quant Capital believe that Havells's marketing spending may also increase after the acquisition.
Analysts say Haveles will now face competition from some of the world's largest companies with operating margins lower than in the past.
"So we expect a significant increase in the company's marketing spending (currently 3-
"In the next few years, revenue will be accounted for," said one analyst . ".
In this case, another analyst at a domestic brokerage company doubted whether Javier had paid the right price.
"I found the deal to be overpriced," analysts said . "
Wall Street will pay close attention to the investor conference call scheduled for Monday afternoon to understand the fundamentals of the transaction.
"Given Havel's past acquisition records, you may expect Havel shares to fall sharply unless the company explicitly defends the price it pays Lloyd," analysts added . ".