French home appliance maker Groupe SEB has acquired 55 per cent in Maharaja Whiteline, privately held electrical appliance maker from Delhi, for an undisclosed sum. Founder Harish Kumar and his family will retain the remaining 45 per cent stake, with Kumar continuing to serve as the chairman and CEO of the firm.

Created in 1976, Maharaja Whiteline has its roots in northern and western India. It is one of the major players in a highly fragmented small appliance market, with a diverse product portfolio that also covers mixer-grinders.

Backed by a network of 330 distributors, Maharaja Whiteline is present in over 26,000 sales outlets. The company clocked revenue of Rs 145 crore (€21 million), with annual growth of 25 per cent. It operates a plant in Baddi in Himachal Pradesh and employs around 350 people.Mumbai-based Singhi Advisors advised Maharaja Whiteline on the transaction.

Earlier this year, Preethi, another large player in small appliances business, was snapped up by Philips as the Dutch major looked to consolidate its position in the country. Although the deal amount was not disclosed, it was rumoured to be around Rs 400 crore or around the same level as its annual revenues.

The latest deal values Maharaja Whiteline at 3.5x its revenues, an industry source privy to the development told VCCircle. This means Groupe SEB would have paid around Rs 280 crore for buying majority stake including the control premium for a well established brand.

Incidentally, in the small appliance segment, some of the listed firms like TTK Prestige and Hawkins Cookers are currently trading at 2x-4x the previous year’s revenues.

A separate media report had earlier hinted that Maharaja Whiteline is eyeing corporate valuation three times its sales.

Maharaja Whiteline is promoted by Harish Kumar who had earlier set up a company called Maharaja International which was involved in large appliances and had an arrangement to sell Electrolux products. The Swedish giant AB Electrolux then acquired majority stake in the company and later raised its holding in the firm through rights issue and subsequent merger with its own wholly owned arm. Kumar was involved in a boardroom battle with Electrolux that came to an end a few years ago and thereafter, Electrolux also sold its loss-making Indian operations to Videocon.

What’s In It For Groupe SEB?

Groupe SEB, which sells products under brands like Tefal, is one of the large small appliance makers in the world but it has been a bit player in India and much behind its European rival Philips.

“This acquisition gives Groupe SEB a foothold in India’s small electrical appliance market that is expanding at an annual rate of 15 per cent,” said Thierry de La Tour d’Artaise, Groupe SEB chairman and CEO. “By deploying synergies with Maharaja Whiteline, Group will help speed the company’s development, as was done with Supor in China and Arno in Brazil.”

Groupe SEB has also announced further acquisition of 20 per cent stake in China’s Supor from the Su founding family. This transaction was finalised and settled on December 13, 2011, for a total amount of €406 million. With these two transactions, Groupe SEB has strengthened its presence in emerging markets.

In the fourth quarter of 2011, it will continue to deliver double-digit growth to consolidated revenue, the company has said. On the other hand, in mature markets and especially in Europe, the sudden economic deterioration over the past few weeks will impact the expected level of sales.

Besides significantly boosting its presence in India, the deal will bring Group SEB face to face with its European rival, Philips that has been strengthening its presence in the small appliance market.

Consolidation In Small Appliances Market

This is the second deal this year in what marks a consolidation in the highly fragmented market with a few large, organised players fighting against hundreds of small regional brands. The industry has low entry barriers due to cheap Chinese imports and dominance of local unorganised market, but M&As will be a function of strong regional brands and their distribution network.

Earlier this year, Philips, one of the top players of the organised sector, had acquired Maya Appliances that sells its products under the Preethi brand and is particularly strong in the southern markets.

Investors are also coming in to participate in the consumer discretionary market in India. Last year, Stovekraft Pvt Ltd raised a second round of institutional funding from Sequoia Capital after attracting investment from SIDBI Venture Capital four years ago. The Bangalore-based small appliances company operates through Gilma and Pigeon brands. That deal was said to have valued Stovekraft over Rs 200 crore, around the same as its revenues of Rs 235 crore. Other branded players in the business include Sumeet, Hawkins, TTK Prestige, Videocon, Kenstar and Bajaj Electricals.

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