The U.S. based Private equity firm Advent International will acquire a majority stake in Indian consumer electronics brand Eureka Forbes for an enterprise valuation of ₹4,400 crores ($597 million), its parent Shapoorji Pallonji Group said on Sunday.
With a consumer base of 20 million and tracks in 450 cities and towns, Eureka Forbes Ltd has built a multi-channel network to be a household name in the vacuum cleaner and water purifier segments. In addition, it has an international trace in 53 countries.
Eureka Forbes (EFL) was founded in 1931, although its parent company, Forbes & Company, dates back to 1767, when John Forbes, a Scotsman, began doing business in India.
The Company’s management has changed throughout the years, from the Forbes family to the Campbells, then to the Tata group, and lastly to the Shapoorji Pallonji Group (SP Group).
Forbes & Company went through several mergers and demergers throughout this time and had to exit many enterprises. Forbes & Company, formerly known as Forbes Gokak Limited, was renamed Forbes & Company on October 25, 2007.
SP Group keeps 73.85 per cent of the paid-up share capital of Forbes & Co. On a consolidated basis, EFL generates more than 80 per cent of its overall operating income after various divestments and business discontinuations in revenue contribution.
Shapoorji Pallonji Group
Based in Mumbai, India’s commercial centre, the SP Group has various interests, including real estate, power, and financial services. The Company wanted to reduce its debt and enhance its balance sheet, and deals are part of the procedure.
EFL would be split into a separate entity from its parent company and listed on the stock exchanges. When EFL goes public, Advent International will buy up to 72.56 per cent of the Company’s then-outstanding stock from SP Group on a fully diluted basis.
According to SEBI‘s takeover laws, Advent would make an open offer. The Advent agreement is the culmination of talks that began earlier this year.
Advent International, Warburg Pincus, and Electrolux, a Swedish home appliance company, were previously nominated for the sale of Eureka Forbes.
Eureka Forbes market valuation:
According to Forbes & Company’s annual report disclosures, EFL had gross debt of ₹285 crores for the year ending March 2021, while cash and bank balance was ₹23 crores, and liquid investment in mutual fund units was ₹86.2 crores.
When adjusted from the enterprise value (including equity, debt, cash, and bank accounts), EFL’s equity value is about ₹4,250 crores. As a result, Shapoorji Pallonji Group’s 72.56 per cent share in the independently listed Eureka Forbes could fetch roughly ₹3,100 crores.
To strengthen the balance sheet:
SP Group will be able to reduce its debt and focus on other operations due to the purchase. Of the group’s collective debt of ₹20,000 crores, ₹10,900 crores follow a one-time restructuring package (OTR) under the COVID-19 support framework regulations of the Reserve Bank of India, proffering the 150-year-old conglomerate more accessible payment terms to clear the dues.
The SP Group had suggested monetizing these properties to raise ₹10,332 crores. Sterling & Wilson Solar, one of the top solar EPC (engineering, procurement, and construction) solutions providers, and Afcons Infrastructure, a construction and engineering business, are the other group companies to be sold.
The executive director of Shapoorji Pallonji and Company, Jai Mavani, stated “We are pleased that Eureka Forbes Limited, a jewel in Shapoorji Pallonji Group has found a new home with Advent, while at the same time unlocking value for shareholders.
This transaction also reflects our stated objective and strategy of significant de-leveraging and focusing on our core competencies and businesses. We thank the EFL family of employees and stakeholders and firmly believe they will benefit from this transaction”.
The Buyout Firm:
Since 2007, Advent has invested $2.2 billion in 16 firms in India, including consumer goods, financial services, healthcare, manufacturing, and technology. Eureka Forbes will be Advent’s fifth consumer-facing acquisition in India.
Crompton Greaves Consumer Electricals (a consumer electronics company), Dixcy Textiles (a men’s innerwear brand), Enamor (a women’s innerwear brand), and DFM Foods (producer of packaged savoury snacks) are the other four.
Standard Chartered Bank advised the transaction as the only financial advisor, and it is subject to closing conditions and statutory and regulatory approvals.