While there is much tumult in the markets over the government proposal to moderate Participatory Notes in stock markets and whether it could harm investor sentiment, the country continues to be an attractive investment destination for foreign private equity players.
Warburg Pincus, one of the world’s leading private equity funds, has decided to pick up a 11 per cent stake in Delhi-based Havells India for $110 million. At this price, the electrical and power distribution Equipment Company is being valued at $1 billion, a little over the current market value of Rs. 3,500 crore (about $885 million).
Havells would utilise the funds to partly retire debt raised by the company earlier this year to acquire lighting business firm SLI Sylvania to enhance its global presence. In March 2007, Havells had acquired SLI Sylvania for $300 million. Of this, $170 million was raised as a non-recourse loan against the assets of SLI Sylvania. Havells had raised $105 million against its own assets to finance the deal.
Talking to the Hindustan Times, Anil Gupta, managing director said that the company would use $70 million from the proceeds to repay debt and the remaining $40 million will be used to enhance manufacturing capabilities.
Gupta said the company would continue to look at acquisitions in the domestic and overseas markets. “We are looking at a reasonable size deal which could be upwards of $150 million,” he added.
Under the current agreement, the company will issue fresh shares and warrants to Warburg Pincus, representing approximately 11.2 per cent of the fully diluted share capital of the company.
Commenting on the deal, Julie Johnson Staples, Head of Communications, Warburg Pincus, said "Our investment in Havells India Ltd is reflective of our confidence in the management team of the company, its strong brand and distribution capability, as well as in the growth potential presented by the electrical products and power distribution segment.”