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  • Analysis of Havells' Acquisition of Lloyd Electric's Consumer Durable Business

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    Rituparna Bhattacharjee
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    Havells India, an electrical equipment company, acquired Lloyd Electric's consumer durable business for INR 1600 Cr. Lloyd Electric had a 14% market share in room air conditioners and distribution networks across India. The acquisition provides Havells with entry into the large and growing consumer durables market and a strong brand in air conditioners. Some challenges include integrating Lloyd's lower-margin business and increased competition in the highly competitive consumer durable market. Investors initially responded positively to the deal, sending Havells' stock up 25% prior to the announcement.

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    Acquistion Analysis

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    M&A

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    Havells India, an electrical equipment company, acquired Lloyd Electric's consumer durable business for INR 1600 Cr. Lloyd Electric had a 14% market share in room air conditioners and distribution networks across India. The acquisition provides Havells with entry into the large and growing consumer durables market and a strong brand in air conditioners. Some challenges include integrating Lloyd's lower-margin business and increased competition in the highly competitive consumer durable market. Investors initially responded positively to the deal, sending Havells' stock up 25% prior to the announcement.

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    © All Rights Reserved
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    151 views8 pages

    Analysis of Havells' Acquisition of Lloyd Electric's Consumer Durable Business

    Uploaded by

    Rituparna Bhattacharjee
    Havells India, an electrical equipment company, acquired Lloyd Electric's consumer durable business for INR 1600 Cr. Lloyd Electric had a 14% market share in room air conditioners and distribution networks across India. The acquisition provides Havells with entry into the large and growing consumer durables market and a strong brand in air conditioners. Some challenges include integrating Lloyd's lower-margin business and increased competition in the highly competitive consumer durable market. Investors initially responded positively to the deal, sending Havells' stock up 25% prior to the announcement.

    Copyright:

    © All Rights Reserved
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    of 8

    Analysis of an Acquisition

    The Bidder & Target


    Havells India Lloyd Electric (Consumer Durable Business)
    A Fast Moving Electric Goods Company Engaged in sourcing, assembling, marketing and
    Produces industrial and consumer electrical distribution of consumer durables including air-
    products- conditioners, TVs, washing machines and other
    12 manufacturing facilities in India household appliances
    Exclusive brand showrooms called Havells Galaxy 10,000 plus direct and indirect dealer network
    Present in over 1 lakh retail outlets 485 authorized service centre
    20,000 strong distribution network 31 company owned service centre
    Present in 40+ countries 14%market share in the room air-conditioners
    24*7 Customer Service segment

    FY 16 (in INR Cr.) Havells Llyod


    India Electric
    Revenues 5,436 2,382
    EBITDA 886 264.42
    Profit 1,208 56.06
    CDB Revenue 1,141 1,384
    Market Cap 26,962 1,308
    Terms of the Acquisition
    Enterprise Deal Value: INR 1600 Cr.
    Duration: February 19th, 2017 to May 8th, 2017
    Financing: Internal accruals and cash balances
    Financial Advisors: Standard Chartered Bank, EY
    Legal Advisors: AZB & Partners

    Stock had risen by around 25% year-till-date until the


    announcement in anticipation of the sale
    Investors expected Llyod to fetch better valuation
    Havells valued the business at 14.5 times the EBITDA which is
    40% lesser than current valuation of Voltas
    Llyods low margin profile is a cause of worry
    Consolidated P/E ratio on completion of acquisition is 57.7
    The Motive!

    Long-term Havells marks a foray into consumer durables industry currently estimated at $15 billion
    Scalability It will gain a strong foothold in the air-conditioners segment. Lloyd is the is third largest
    player in the room AC segment after Voltas and LG .The brand has also expanded into the TV
    and washing machine segments.
    New Product Long term scalability to its consumer business, which account for nearly 21% of the total
    lines standalone revenues of the company.
    Havells is also planning to expand the product line-up under the Lloyds brand as it re-works
    the business strategy.
    Domestic
    Expansion
    Near Term Opportunities & Challenges
    Estimated Size of Consumer Durable
    Market in 2016: US $ 12.5 Billion
    CAGR: 13%

    Estimated size of AC Market in


    2015: 10 Million units
    CAGR:6.7%

    Highly Competitive Market: LG,


    Samsung, Blue Star, Voltas

    Havells' current business and competitive intensity in consumer durable business


    Margin dilution- Lloyds margin in consumer durable is 7% as opposed to Havells 25% in electric consumer durables
    Marketing spend is expected to go up to survive the new added competition from some of the largest players
    A History of Successful Acquisitions
    Stock Performance of Havells After Merger
    Thank You!

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