The sale will further help the leveraged 154-year-old construction and real estate conglomerate pare debt and focus on core operations. The loss-making business, currently, a subsidiary of listed Forbes & Co. will be spun out through a National Company Law Tribunal (NCLT) approved demerger process and then be listed on the BSE Limited. Upon listing, Advent will purchase up to 72.56% of the Company’s then outstanding stock on a fully diluted basis from SP Group. Advent will thereafter make an open offer in compliance with applicable regulations. The transaction is subject to closing conditions and receipt of relevant statutory and regulatory approvals.
The Forbes board met on Sunday to ratify the divestment.
The market capitalisation of Forbes & Co. on Friday was Rs 5,140.23 crore.
ET was the first to report that Advent was the frontrunner online on September 9th
The Pallonji family had bought the business from the Tata Group almost two decades ago. It had mandated Standard Chartered Bank for a formal sale process in late 2019, expecting a billion dollar valuation to start with but scaled down subsequently to Rs 5,000-6,000 crore for the unit. But the Covid pandemic forced it to abandon the process midway and start again at the beginning of the year.
Advent trumped Warburg Pincus and Swedish home appliance maker Electrolux, a former JV partner of Eureka Forbes, in the last lap of the competitive process, said people involved.
In 2015, Advent had teamed up with Temasek of Singapore to buy Crompton Greaves’ consumer business through a similar demerger exercise. After selling chunks of the stock in the public market, Advent sold the last tranche of 5.36% of the company this June through block trades. Last month, Advent also sold its controlling stake in ASK Wealth Management to Blackstone in a billion dollar deal.
“Eureka Forbes Limited is the No. 1 player in an under-penetrated market poised for strong growth over the next several years,” said Shweta Jalan, Managing Director, Advent India PE Advisors Private Limited. “Their Aquaguard brand is a household name in water purification, helping safeguard the health and well-being of a large segment of the Indian population.”
Eureka Forbes is among the largest vacuum cleaner and water purifier brands in India, with 20 million customers across 35 countries. Despite an early mover advantage, increasing competition, lack of focus, a heightened cost structure and negligible capital investments resulted in the company losing market share to local and global players in both the mass and premium segments. In FY 21, the business generated Rs 2,857 crore of revenue while notching up a net loss of Rs 78 core. However, the company has managed to shrink this by 76% year-on-year while increasing operating profit six fold in the same period. The company’s attempts at global expansion through an acquisition in Switzerland had boomeranged with the management being forced to restructure the business and write off two significant investments in Europe and Asia.
Having delivered innovative products and solutions for our ever-growing customer base, we are now buoyant about the opportunity to unlock further growth and are excited to embark on this new journey with the promise of a better tomorrow.” said Mr. Marzin R Shroff, Managing Director & CEO, Eureka Forbes Limited.
In March, the Reserve Bank of India-appointed KV Kamath committee approved a one-time restructuring package for Shapoorji Pallonji & Co. Pvt. Ltd’s Rs 10,900 crore debt under the Covid-19 relief framework. SPCPL is the holding company of the 150-year-old SP Group. Under this plan, the group didn’t have to pay interest for a year and no principal for two years, giving it time for disinvestments. The group expects debt to be cut to Rs 3,000-4,000 crore at the end of the year.
The divestment is part of the group’s initiative to strengthen the consolidated balance sheet. ET in its September 8 edition reported that the Mistry family is exploring a sale of their stake in Sterling Wilson Solar, the group’s solar energy engineering, procurement and construction (EPC) arm as part of this restructuring exercise.
Advent has deployed $2.3 billion in India since opening its India office in 2007 both growth equity investments as well as buyouts. Its portfolio includes Aditya Birla Finance, RA Chem, Bharat Serums, DFM Foods, Dixcy Textiles.
