Havell's eyes Europe buyout, lines up $150 m

Delhi-based electrical products manufacturing company, Havell's India Ltd, has decided to embark on inorganic growth in the European market, and is raising a cash chest of about $150 million to fuel acquisitions. The company has already signed non-disclosure agreements (NDAs) with three companies in Europe and is expected to close one of the deals before the end of March.

"Havell's has signed the NDAs with the three companies and is currently conducting the due diligence process in all the three places separately," a senior company official who did not want to be named told Hindustan Times.

"The discussions are on simultaneously with all the three companies, but we will acquire only one of them," he added.

The deal is expected to be worth between $150 million and $200 million. Typically these companies have a turnover of around $400 million and earnings before interest, depreciation, tax and amortization (EBIDTA) of around 10 per cent or $40 million, investment banking sources said.

The proposed deal will be funded through internal accruals and fresh funds that will be raised shortly through a fresh issue of equity shares.

Havell's told stock exchanges on Tuesday that its board had approved a proposal to raise $150 million through different instruments including a Qualified Institutional Placement (QIP), Foreign Currency Convertible Bonds (FCCB) and Global Depository Receipts (GDRs). 

The board also approved an increase in the borrowing limit and authorised share capital to Rs 2,500 crore and Rs 40 crore respectively, it said.

The company official said Havell's will raise funds through a QIP or a GDR issue on the London Stock Exchange. "This is an enabling provision and we may not raise the entire amount. Depending upon the deal size of the acquisition, we may also raise some debt to finance the deal," he said.

The intent of Havell's acquisition is to acquire the front-end market for products to be made in India.

"Havell’s is currently exporting around 10 per cent of its top-line revenue, which was around Rs 1,100 crore in 2005-06 and is expected to be around Rs 1,500 crore to Rs 1,600 crore in 2006-07. This year, export earnings should be around Rs 150 crore. The acquisition will help the company in leveraging European technologies and Indian costs in production," the company official said.

Once the deal is concluded, the company's exports will increase significantly, he said.

Email Arun Kumar: arunkumar@hindustantimes.com