Avantha to sell a part of its 42.7% stake in Crompton Greaves Consumer Products

Crompton Greaves Ltd, a part of Gautam Thapar-promoted Avantha Group, said on Monday that one of the entities of the promoter group (Avantha Holdings) is likely to sell a part of its stake in Crompton Greaves Consumer Products Ltd, the proposed demerged consumer business division.

However, the divestment would be subject to agreement of terms and conditions and execution of definitive agreement, it said in a stock market disclosure. The company did not reveal further details on the development like who could be the buyer, the quantum of stake and the time-frame for transaction.

Last month, the company had obtained its board's approval to demerge its consumer products business into a separate listed firm Crompton Greaves Consumer Products Ltd.

The demerger proposal was part of the group's plans to create better growth opportunities for its two large but significantly different businesses - power, industrial & automation which is a B2B business, and the consumer products business which is B2C.

The company operates three business groups – power systems, industrial systems and consumer products. Under the consumer product business, Crompton Greaves manufactures products ranging from fans, light sources and luminaires, pumps and household appliances such as geysers, mixer grinders, toasters, irons and electric lanterns.

Currently, Avantha Group owns 42.7 per cent equity stake in Crompton Greaves. Given the vertical demerger plan of the consumer products unit, it would own a similar stake in the demerged firm.

Avantha Holdings, in particular directly owns 40.84 per cent stake of this 42.7 per cent. The rest is held by other investment entities. It is not clear if the remaining stake is also indirectly held by Avantha Holdings.

Crompton Greaves has made a dozen of acquisitions over the past decade starting with Pauwels (2005), Ganz (2006), Microsol (2007), Sonomatra (2008), MSE Power System (2008), Power Technology Solutions (2010) and three units of Nelco (2010). More recently it acquired compact fluorescent (CFL) manufacturing business of Himachal Pradesh-based Karma Industries for $2.6 million.

Avantha Group also runs India’s largest paper company Ballarpur Industries, besides energy generation company Avantha Power. It also has several small and medium size companies in processed food, IT, chemicals, etc.

The group has been laden with debt and has been looking to sell assets to deleverage the balance sheet. It had also scooped up funding from Apollo Global and ICICI Venture's joint special situations fund AION some time back.

Avantha Group has also just struck a deal to sell one of its thermal power units under Avantha Power for an enterprise valuation of Rs 4,200 crore ($680 million).

Crompton Greaves owns 23.14 per cent stake in Avantha Power.

Shares of Crompton Greaves closed the day at Rs 204.20 per share, up 4.37 per cent on the BSE in strong Mumbai market on Monday.

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