Crompton Greaves offers ₹1,400 crore for Kenstar
Crompton Greaves Consumer Electricals Ltd has offered to pay around ₹1,440 crore to buy home appliances brand Kenstar from Videocon group, two people directly aware the talks said. But the deal hinges on a “sustainable sales guarantee” clause that private equity-backed Crompton Greaves Consumer wants to include in the final agreement, the people cited above said on condition of anonymity.
“This is basically to ensure that the sales numbers of Kenstar quoted by Videocon do not deviate drastically in the near future from what has been stated,” one of the two people, a senior investment banker, said. The transaction will be a leveraged buyout, the person added.
“However, both sides are keen to work around this and close the transaction soon,” the person added. Kenstar, a part of the Dhoot family controlled Videocon group makes a range of kitchen and home appliances such as air conditioners, air coolers, mixer grinders and electric kettles. Kenstar was incorpocited rated in 1995 as “Kitchen Appliances India Ltd. According to the latest corporate filings available, the company reported a loss of ₹26.42 crore on a total operating income of ₹1,939.50 crore in FY15.
While a spokesperson for Crompton Greaves declined to comment, emails sent to Videocon remained unanswered till the time of writing the article.
Kenstar was put on the block earlier this year by Videocon group to pare its debt which currently stands close to ₹40,000 crore. The group has been under considerable pressure from banks to bring its debt down to manageable levels, the people above said. Both persons described the sale of Kenstar as relatively easy transaction for Videocon group since it is a separate consumer brand unlike the other range of products of Videocon group which are sold under the Videocon brand name, said the people cited above.
Nudged by the banks, Videocon has sold its Mozambique oil assets to state-run Oil and Natural Gas Corp (ONGC) for $2.475 billion and its Direct To Home business to Dish TV in an allstock deal. In addition to its overseas oil and gas assets, Videocon group also has 25% stake in Ravva oil field which is operated by Cairn India in Andhra Pradesh.
Crompton Greaves Consumer was originally part of Gautam Thapar-promoted Avantha Holdings Ltd. In 2015, PE funds Advent International Corp. and Temasek Holdings Pvt Ltd acquired 35% of Crompton Greaves’ consumer products business from Avantha Holdings Ltd.
In July 2014, Crompton Greaves had decided to demerge its consumer products business unit into a separate publicly traded firm, as a prelude to a potential stake sale.