Warbug Pincus and Bain Capital have expressed interest to buy into the lighting business of Surya Roshni, as the New Delhi-headquartered company is demerging it into a standalone unit. The private equity acquirers could have the country’s second largest maker of lighting goods at about $400 million, or Rs 2,400 crore.
Investment bank Ambit is advising Surya Roshni on the planned demerger, which it hopes to conclude early next calendar.
The four-decade-old Surya Roshni, is the largest manufacturer of galvanized pipes but wants to separate it from the faster growing lighting business. Global private equity interest in the Indian consumer electrical companies heightened after Advent International and Temasek Holding acquired Crompton Greaves Consumer Electricals last year.
Long-term risk investors are bullish on the sector as the government is seen pushing for smart cities and new townships as part of the biggest urbanization drive in Asia’s third largest economy, which is also the world’s fastest growing.
The company’s consumer business — which is predominantly LED and conventional lighting, besides fans and other appliances — grew 24% to touch Rs 1,472 crore last fiscal. The cash profit rose 29% to Rs 115 crore as sales of products jumped twofold during FY16.
The steel pipes business, bearing the impact of lower prices, reported Rs 1,829 crore, slightly behind previous year’s Rs 1,886 crore. Surya Roshni shares have steadily climbed up in the last three months to a record high of Rs 186 this week before closing at Rs 183 on the BSE on Tuesday.
The company expects the lighting business to show up with about Rs 150 crore of cash profit. In context, the private equity offers are valuing the standalone unit at Rs 2,200-2,400 crore, giving it 14 to 15 times multiples.
Potential private equity suitors have seen healthy gains from consumer electrical stocks. Warburg, for instance, made hefty returns on Havells, selling its holding for Rs 1,150 crore after investing Rs 525 crore. Advent and Temasek have seen their investment in Crompton Greaves nearly double in value in the past one year.
By Baishakhi Dutta