Actis to buy out loss-making general lighting business of Halonix

Private equity firm Actis is looking to buy the loss-making general lighting business of lighting products maker Halonix Ltd (formerly Phoenix Lamps). Halonix itself is majority-owned by Actis and this is the second attempt by the PE firm to buy out the general lighting business, which would leave the public-listed firm with the automotive lighting unit.

Halonix revived the plan to sell its general lighting business earlier this year and its shareholders recently approved the plan to transfer the division to a subsidiary called Halonix Technologies Ltd. The firm disclosed on Tuesday that it has entered into an agreement to sell Halonix Technologies to entities affiliated to Actis.

The general lighting business manufactures and sells compact fluorescent lamps, luminaires and LED technology-based lighting products used in households and commercial establishments. Its manufacturing facilities are currently located in Hardwar and Dehradun. Although this business competes with the likes of Philips, Havells and Osram, and constitutes around 60 per cent of the company’s revenues, it happens to be a loss-making business.

It has been facing pressure from high rate of warranty returns, higher provisioning requirements, regulatory changes, threats of supplies coming in from China, high input costs due to rupee depreciating against the US dollar, heavy fluctuation in prices of some critical raw materials, etc. It also recorded losses of Rs 46 crore (FY11), Rs 31 crore (FY12) and Rs 29 crore in the nine-month period ended December 31, 2012, which affected the overall performance of the company.

Halonix will retain the profitable automotive lighting business which includes halogen lamps for automobiles (two & three-wheelers, passenger cars and commercial vehicles) and off-road applications.

Private equity firm Actis, which struck a number of control deals in India, had acquired a majority stake in the company way back in 2006-07 with a final tranche of 20 per cent stake through an open offer – taking its holding to 66 per cent. The open offer was made at Rs 190 a share and Actis’ investment is deep underwater.

Halonix scrip last traded at Rs 37.5 a share, up 3.45 per cent on the BSE in a strong Mumbai market on Tuesday. At this price, Actis has lost over three-fourth of its investment value.

This will be its second attempt to strike a deal to separate the general lighting business. In July 2010, the firm decided to sell the general lighting business to Actis, but the deal was scrapped and the company decided to continue with both automotive and general lighting as two separate and distinct lines of business.

At that time, too, the company decided to first hive off the general lighting business to a subsidiary, Halonix Technologies, and then sell the shares of the subsidiary to Actis.

Last October, Halonix acquired Luxembourg-based International Lamps Holding Company SA for an undisclosed amount.

(Edited by Sanghamitra Mandal)

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