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Havell's acquires Standard Electricals; to privately place equity

Havell's India Limited, or HIL, has acquired a 60 per cent stake in electrical switchgear manufacturer Standard Electricals Limited, or SEL, for Rs 200 million and announced that further acquisitions are on the anvil over the next 2-3 years.

In addition, the company's promoters are planning to privately place up to 30 per cent stake in HIL to institutional investors over the next six months for retiring high cost debts, Anil Gupta, director of Havell's India, said.

HIL has appointed PricewaterhouseCoopers (PwC) for identifying the acquisition targets. PwC is also scouting for joint venture partners abroad for Havell's India.

Gupta said, following the transaction, the board of directors of SEL has been reconstituted with a majority participation by Havell's. With this acquisition, Havell's has become the number one player in the domestic switchgear industry.

"Standard is a very popular brand in domestic switchgear products in India, the Far East, and West Asia. We will be utilising SEL's strengths here and abroad for expanding our presence. We will continue to market products under both Standard and Havell's brand," he added.

The Gupta family controls 51 per cent stake in HIL, Geyer of Germany holds 14 per cent stake and the rest is with the public.

The company has already got its shareholder approval for expanding its equity base from five million shares to 7.5 million shares.

Around 22 per cent of this expanded equity (or 30 per cent of existing equity) would be privately placed to institutional investors to raise Rs 150 million.

The money would be used for further investments in research and development and also for retiring high cost debts.

HIL expects to close the 1999-2000 fiscal with a turnover of Rs 1.05 billion, up 25 per cent over the previous year. Its net profit is likely to be in the range of Rs 38 million, up 40 per cent over a year ago and the earning per share is likely to be Rs 7.

HIL has already set up three separate 50-50 joint ventures with Dorman Smith of UK, Crabtree of UK and DZG of Germany. With these ventures, the Havell's group is targetting to close the current fiscal with a turnover of Rs 3 billion, up from Rs 2.30 billion a year ago.

"Since liberalisation, the Indian industry is undergoing a metamorphosis with advent of new technologies, multinational companies and falling trade barriers. The electrical industry is no exception with multi-nationals increasing their presence in the high growth sector with latest technology and deep pockets to sustain them through a reasonably long period," he said.

"This alliance with SEL is one of the first steps taken by an electrical industry player towards consolidation of resources, viz., human, financial, manufacturing and research and development," Qimat Rai Gupta, chairman and managing director of Havell's India, said.

He added, "The industry is witnessing increasing consolidation and marginalisation of smaller players. We believe that only companies with strong brand, latest technology and a diverse distribution network would be able to progress and compete in the industry."

"Havell's and Standard after this, consolidate their joint leadership as the largest player in domestic switchgear and the second largest in industrial switchgear, after L&T," he said.

J K Gupta, chairman of Standard Electricals Limited, said, "The investments required today to set up excellent R&D facilities and plants to manufacture world-class electrical engineering products have become prohibitive for smaller players."

With standard entering the Havell's family, our joint strength would not only enable us to offer the best of products and technologies to the customer, but also take on the competition from multinational companies.

"With this, we would have an international competitive advantage in the electrical industry - both in terms of cost and technology."

Timmy Kandhari, executive director, financial advisory services of PricewaterhouseCoopers, said, "It is a move to harness the strengths of both the companies to achieve competitive advantage in today's markets."

"Through this transaction, Havell's has secured for itself a unique leadership position in the industry. We foresee, and are acting on, similar transactions aimed at consolidation among Indian companies happening across industries.

UNI

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