Crompton Greaves to demerge consumer products unit into separate listed firm

Crompton Greaves Ltd, the flagship company of Gautam Thapar-promoted Avantha Group, is planning to demerge its consumer products business into a separate listed firm, the company said in a stock market disclosure.

The firm said the demerger will 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.

“This step will create a more flexible capital structure for the two businesses to grow independently, allow them to pursue more ambitious strategic goals and, thus, create further value for existing shareholders,” it added.

The engineering firm is into power transmission and distribution products and is among the world’s top 10 transformer manufacturers. 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.

For the year ended March 31, 2014, the company generated revenues of Rs 13,481 crore, close to third of which came from power systems. The consumer products unit grew 9.8 per cent to churn out revenues of Rs 2,847 crore with industrial systems pitching in with Rs 1,816 crore. Its power systems group grew the fastest in FY14.

Shares of Crompton Greaves were trading at Rs 214 per unit, up 15.15 per cent on BSE in a mid-day trades on Thursday.

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. 

Earlier media reports had speculated that Avantha Group, the parent company of Crompton Greaves, is mulling to offload its entire 42.7 per cent in the company and said the promoters have hired bankers for the same.

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

(Edited by Joby Puthuparampil Johnson)

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