On 8th May 2017 India’s leading FMEG company, Havells India Ltd. announced successful completion of its acquisition of Lloyd Consumer Durable Business Division (Lloyd Consumer).
Earlier, in January 2016, Havells completed its disinvestment of 80% stake in Havells Sylvania Malta BV [Sylvania]. This move had come in order to focus more on the domestic Indian operations in addition to reducing the uncertainty and earnings volatility from Sylvania.
Since the sale of Sylvania Havells had been looking for an opportunity in the Indian consumer durables market and so this acquisition of the consumer durable business of Lloyd is in-line with strategy of Havells of going deeper into Indian consumer’s homes and driving domestic expansion.
Havells Gets Access to The Lloyd Brand and Distribution Network
As per Havells’ press release dated on 8th May 2017, the acquisition of Lloyd’s included its consumer business infrastructure, people, distribution network including and not limited to absolute, exclusive ownership and right to all intellectual property of Brand Lloyd, logo, trademark, goodwill and attendant rights of Lloyd Consumer.
The acquisition of Lloyd Consumer would provide a mature and ready consumer electronics distribution channel to Havells. Since Havells currently has an electrical products focused distribution channel which is not completely suitable for the consumer durables market, Lloyds critical distribution channel is of great value in this acquisition. Havells gets ready access to approx. 10,000 sales points as well as approx 510 service centres. Due to this reason and encashing on the strong Lloyd consumer brand Havells is expected to continue to maintain both the brands – Lloyds and Havells.
The acquisition was completed at a value of Rs. 1,600 Cr. on a debt free, cash free basis. Though Havells had the ability to fund the acquisition entirely through internal accruals but the company chose to go ahead with a mix of internal accruals and debt.
As per an interview to The Hindu Business Line dated on 19th February 2017, Chairman and Managing Director of Havells India, Mr. Anil Rai Gupta commented that the country’s consumer durables industry is currently estimated at $15 billion and growing at double digits. Lloyd had build a brand and strong distribution and service network to provide a comprehensive experience to its consumers. He also mentioned that Lloyd is amongst the top 3 brands of air-conditioners (after Voltas and LG) and has expanded into TVs and Washing machines. The acquisition puts Havells in strong position and fits the company philosophy on brand and distribution expansion backed by good product technology and strong manufacturing capabilities.
To sum up the Lloyd Consumer acquisition in Mr. Anil Rai Gupta’s words “The brand franchise, the distribution franchise, the service franchise and the talent are the key success factors for this business and that’s what we get through this deal.”
Future Plans for Havells Consumer Durables Business
Havells did not acquire Lloyd’s manufacturing facilities since it was felt that Havells had more modern facilities, so the TV’s may be manufactured at Havells Neemrana plant. It has the capacity of 6 lakh televisions per annum. For the rest, Havells shall continue to source products from Lloyd Electric’s with an intent to gradually develop its own manufacturing over time.
Further Havells has plans to enter into personal grooming products and also doubling its retail network of exclusive brand outlets which will be dealer-owned and operated from the current 120 shops to 300.