PE major Advent snaps up Eureka Forbes for Rs 4,400 crore

The sale process will help the over 156-year-old SP Group pare the debt pile

After a long wait, the Shapoorji Pallonji Group has closed the sale process of its consumer durables business under the Eureka Forbes label by picking the American private equity fund Advent International’s Rs 4,400-crore offer for a 72 per cent stake.

The sale process, which began in November 2019, will help the over 156-year-old SP Group pare the debt pile and sharpen the focus on the flagship construction and engineering business under Afcons.

The valuation of Rs 4,400 crore for a 72.56 per cent stake is is at an enterprise level and subject to closing adjustments and also includes an open offer for the remaining stake after the demerger and listing of Eureka Forbes, the SP group said in a statement on Sunday.

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The 156-year-old-Shapoorji Pallonji Group, which owns over 18 per cent in the Tata Group, is sitting on a debt pile of over Rs 20,000 crore of which around Rs 12,000 crore are under the moratorium till 2023 allowed by the RBI to help borrowers tide over the cash flow issues arising from the pandemic.

"Pursuant to a scheme of arrangement, Eureka Forbes, a 100 per cent subsidiary of Forbes & Company, will be demerged into a standalone company and will be listed on the BSE. Upon demerger and listing, Advent will purchase up to 72.56 per cent of Eureka Forbes then outstanding stock on a fully diluted basis from SP Group owned Forbes & Co, and will also make an open offer for the remaining stake.

"The transaction is subject to closing conditions and receipt of the relevant statutory and regulatory approvals," the statement said without offering a timeline for the demerger and listing.

When contacted, Jai Mavani, executive director at Shapoorji Pallonji & Company told PTI that the Rs 4,400 crore valuation is for the entire stake in the company, which means including the valuation cost of the open offer. But he could not offer a time-line for the process to complete as the demerger process is pending before the Mumbai NCLT. This transaction also reflects the company's stated objectives and strategy of significantly de-leveraging and focusing on core competencies and businesses, Mavani said.

"We look forward to working with Marzin Shroff and his team to guide Eureka Forbes next phase of growth and solidify its market leadership," said Shweta Jalan, managing director, Advent India PE Advisors.

"Having delivered innovative products and solutions for our ever-growing customer base, we are now buoyant about the opportunity to unlock further growth," Marzin R Shroff, managing director and chief executive of Eureka Forbes.

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Eureka Forbes leads in water purifiers and vacuum cleaners and also air purifiers and home security solutions. It had an annual sales of around Rs 3,000 crore in 2020. It pioneered the concept of direct sales with its Eureka Forbes labeled vacuum cleaners in the country decades back and has over 20 million customers, across 53 countries. The company put the asset on block in November 2019 as its bid to raise funds after pledging a portion of its massive holdings in Tata Sons was objected to by the Tatas and the matter is still pending with the apex court.

Advent was competing with Warburg Pincus, and Swedish home appliance maker Electrolux, with which it had a long standing joint venture between 1982 and 2001.

Sahil Dalal, a managing director at Advent India PE Advisors, said Advent has been investing in India since 2007 and opened its Mumbai office in 2009.

Over the past 14 years, it has invested/committed $2.2 billion in 16 companies with headquarters or operations in India across sectors such as consumer products, financial services, healthcare, industrial and technology. Its recent investments include ZCL Chemicals, a leading manufacturer of active pharmaceutical ingredients and advanced intermediates; RA Chem Pharma, a forward-integrated diversified API player; and Aditya Birla Capital, the holding company of the financial services businesses of Aditya Birla Group. Since its founding in 1984, the fund has invested $56 billion in over 380 companies in 42 countries, and as of March 2021, had $75 billion in assets under management.

In India, Advent has made four consumer investments, including Crompton Greaves Consumer Electricals, Dixcy Textiles, a leading men’s inner-wear brand; Enamor, a leading women’s inner-wear brand; and DFM Foods, a leading producer of packaged savory snacks.

Eureka Forbes will be its fifth buy out in the consumer segment, strengthening its position as one of the leading retail and consumer, investors.

The Shapoorji Pallonji Group has a rich legacy of 156 years and a presence in over 50 countries and delivers end-to-end solutions across industry segments in engineering and construction, infrastructure, real estate, water, energy and financial services with a strong focus on sustainable development and corporate social responsibility. Its popular Aquaguard range, extensive pan-India distribution network, and after-sales service are some of the key factors that made Eureka Forbes an attractive target for Advent.

The firm also launched Forbes Coronaguard, a virus disinfectant device as well as robotic vacuum cleaners. Eureka Forbes was set up in 1982 as a joint venture between Forbes & Co and the Swedish whitegoods major Electrolux, which in 2001 exited the partnership as part of its global strategy of quitting direct marketing business. The original roots of Forbes & Co go back 254 years to 1767 when John Forbes of Scotland opened his business in the country engaged in manufacturing, trading and shipping, which was later taken over by the Tatas.

In 1982, the Tatas roped in Electrolux to launch Eureka Forbes as a joint venture and in 2001 the Tatas sold their stake in Forbes & Co to the SP Group which also bought out the 40 per cent stake that Electrolux held in the JV. While Standard Chartered Bank was the sole financial advisor, Desai & Diwanji was the legal counsel for the SP group, which was also helped by Katalyst Advisors, Boston Consulting Group and KPMG India.

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