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AUG 31 2017

Surya Roshni looking for a new owner; Warburg Pincus, Crompton Greaves eye controlling stake

  • Economic Times, ET Bureau / Hyderabad
  • Created: Thu 31st AUG 2017

 

Homegrown lighting solutions brand Surya Roshni — remembered for the 1990s television commercials featuring Renuka Shahane, Shweta Tiwari, and Preity Zinta — is looking for a new owner.

The New Delhi-based maker of lighting solutions, appliances, steel pipes, and cold-rolled strips is looking to exit the 44-year-old business, said sources aware of the development. Buyout funds Warburg Pincus, Advent International-backed Crompton Greaves Consumer Electricals, and Bain are among those in the fray to buy a controlling stake in Surya Roshni, which leveraged celebrity endorsements to enhance its brand recall in the 1990s.

A year ago, the promoters had planned a demerger of the lighting and steel businesses and sell the former. But that process, halted some time ago, has recently been resumed. Ambit Capital is running a formal auction process on behalf of the Surya Roshni promoter family. Surya Roshni and Warburg did not immediately respond to a mail seeking their comment. Bain Capital and Advent declined to comment.

Shares in Surya Roshni gained 53% in the last one year, compared with a 13% gain in the benchmark Sensex. The company’s current market capitalization is Rs 1,239.54 crore. With a net profit of Rs 63.1 crore in FY17, Surya Roshni has a market share of 13% and is the second largest lighting player in India. The company is also the largest manufacturer of galvanised pipes.

The four-decade-old Surya Roshni, run by Jaiprakash Agarwal’s family, last year thought of demerging the business into two. The company’s flagship lighting business was proposed to be hived off into a separate entity, separating the rest of the businesses such as pipes and galvanization units.

Then, the promoters wanted to sell only the lighting business. Ambit was also initially tasked with the demerger of the listed entity and sell the lighting business to financial partners, the source said. But now the promoter family is exploring both options.

“The negotiations are on for some or all of the assets. The promoters will decide whether to demerge and sell or go in for a total takeover as the conversation progresses. They are open to both options,” said one of the sources mentioned above.

Founded in 1973, the Surya Group has a turnover of Rs 4,000 crore and exports to 40 countries. The company’s business segments are broadly divided into two — lighting and steel. The company’s consumer electric division consists of LED and conventional lighting, fans and other appliances. It reported sales of Rs 1,349 crore in FY17, while the steel division generated sales of Rs 2,064 crore, the company’s website showed.

Global private equity funds have been bullish on sectors linked to the domestic economy. Warburg, which has been investing in India for the past 20 years, is one of the most aggressive contenders for Surya Roshni. Famed for its mind-boggling returns from Bharti Airtel, Warburg made a near three-times return from its investment in Havells, a competitor to Surya Roshni in the lighting business.

Advent, along with Singaporean sovereign fund Temasek Holdings, controls Crompton Greaves and has been making aggressive bets on the Indian market. “Such home-grown businesses are great opportunities for large-ticket private equity funds. These funds would be able to turn the company around and run it more professionally, if required.

Moreover, such large scale investments and controlling transactions are also a sign that confidence is growing among global investors when it comes to acquiring Indian assets,” said Rajesh Gupta, partner, SNG and Partners, a Mumbai-based law firm.

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Delhi TOTAL Roshni Powertech Ltd Shree Renuka Sugars Ltd Mumbai Consumer India

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