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Exclusive | Shapoorji Pallonji Group kick-starts sale process for Eureka Forbes; top PE funds in fray

Shapoorji Pallonji Group has initiated preliminary discussions with investment bankers for a potential sale of its consumer durable flagship Eureka Forbes.

November 20, 2019 / 10:17 PM IST

The Shapoorji Pallonji Group, which is tackling liquidity concerns and recently faced the ire of shareholders of the newly-listed arm Sterling & Wilson, with promoters seeking an extension to repay dues it owes to the company, is in damage control mode.

The 150-year-old diversified conglomerate that has interests in sectors ranging from construction and real estate to power and biotechnology has initiated preliminary discussions with investment bankers for a potential sale of its consumer durable flagship Eureka Forbes.

Top private equity funds have been reached out for the proposed transaction, sources with knowledge of the matter told Moneycontrol. Eureka Forbes is a market leader in the water purifier and vacuum cleaner segments and is a subsidiary of listed parent company Forbes & Company.

“The deal is at a very early stage and a formal appointment of advisors should happen shortly. But meanwhile, informally, feelers have been sent to leading private equity funds like Carlyle, Apax Partners, Temasek, TPG, Advent International and Fairfax India Holdings,” the source said.

“Eureka Forbes is a high quality asset with the top-selling Aquaguard brand and its distribution network, after sales service and strong brand recall should definitely attract strong interest from global funds, including strategic suitors who may be keen to strengthen their existing portfolio. Added to that, there is huge scope for further growth in the water purifier market which is under-penetrated. The promoters are expecting an equity value of Rs 4,500 crore to Rs 5,500 crore. An internal restructuring exercise, involving a potential demerger of Eureka Forbes could also be evaluated in Forbes & Company before the proposed sale,” another source added.


As per its website, Eureka Forbes has Asia's largest direct sales task force, a base of 20 million customers and is present in 1,500 cities and towns in India with a global footprint in 53 countriesA PTI report from March 2019 mentioned that the company, which had a gross group turnover of Rs 3,000 crore in 2017-18 (April-March), gets over half of its revenue from the water purifier segment.

The remaining revenue comes from other verticals such as vacuum cleaners, air purifiers, security solutions among other segments. It has manufacturing units at three locations -- Bengaluru, Dehradun and Baddi -- with a manufacturing capacity of around 12 to 15 lakh units per annum.

Earlier this week, Forbes and Company made the following disclosure to the stock exchanges: “The Company has been frequently queried by various stakeholders including by shareholders of the Company regarding future plans relating to unlocking value of Eureka Forbes Limited. Currently, Eureka Forbes Limited is a 100% subsidiary of the Company. The Board of Directors of the Company have authorized the management of the Company to evaluate a scheme of arrangement and/or other appropriate mechanisms to enable an eventual listing of Eureka Forbes Limited, with an intention to unlock value in the hands of all the shareholders of the Company. These may also include listing, dilution/sale or combination thereof of Eureka Forbes Limited.”

On November 14, in a disclosure to stock exchanges, the promoters of Sterling & Wilson Solar said they couldn’t honour their inter-corporate loan repayment commitments made during the IPO in August and sought more time from the company’s board to repay loans worth Rs 2,341 crore, citing unforeseen reasons including a liquidity crisis at the group level.

Following the announcement, the company’s stock tumbled. In an interview to Economic Times, Shapoor Mistry, Chairman of the Shapoorji Pallonji Group, said that the promoters would stand by the company’s repayment commitments and that a delay does not mean dishonouring that pledge.

“We want to reiterate that the request for an extension of time for the repayment of the intercompany dues does not in any way dilute our intent to honour these payments,” Mistry said.

Moneycontrol is awaiting a response from Shapoorji Pallonji Group. This article will be updated as soon as we get a response from the group. Carlyle, Apax Partners, TPG and Temasek declined to comment while Fairfax & Advent International are yet to respond to Moneycontrol.
Ashwin Mohan
first published: Nov 20, 2019 09:40 pm

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