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Surya Roshni’s lighting biz gets bids from Warburg Pincus, Bain Capital

31 August, 2016

New Delhi-based Surya Roshni’s lighting business has received interest from private equity firms Warburg Pincus and Bain Capital as the company is demerging it into a standalone unit.

The Times of India reported that the private equity acquirers have expressed interest to buy the lighting business of the firm for $400 million (Rs 2,400 crore).

Surya has a strong presence in the steel segment and is the second-largest in the lighting business, according to its website. It manufactures fans, cold rolled strips and PVC pipes, etc with sales turnover close to Rs 4,000 crore 

($650 million), and exports to over 44 countries. 

The company has informed the stock exchanges that it has no plan to demerge and the news is speculative. Bain Capital declined to comment. A spokesperson for Warburg Pincus did not respond to requests for comments.

However, The Times of India report cited a company spokesperson as saying that the investor community has time and again suggested demerger of lighting and steel businesses for value creation for stakeholders. 

It indentified investment bank Ambit as adviser to Surya Roshni on the planned demerger, which it hopes to conclude early next calendar year. 

Incorporated in 1973 as Prakash Tubes Pvt. Ltd, the company’s founders BD Aggarwal and JP Aggarwal started operations as a steel pipe manufacturing unit in Haryana. A decade later, the company diversified into manufacture of lighting products. Both the products are marketed under the brand name Surya.

According to a May 2016 ICRA credit report, the steel division accounted for 60% of the company’s revenues while the lighting unit represented 40% in FY2014-15. However, the lighting division contributed to the lion’s share in operating profit at 71%.

The firm reported an operating income of Rs 2,857 crore and profit after tax of Rs 54 crore in FY2014-15 compared with an operating income of Rs 3,031 crore and PAT of Rs 53 crore in the previous year.

In the last financial year, the company’s steel business reported revenues of Rs 1,829 crore, while revenues from the lighting products touched Rs 1,471 crore. However, the lighting business contributed Rs 137 crore in profits before tax, while steel contributed Rs 44 crore.

In the steel division, it manufactures electric resistance welded (ERW) pipes, cold rolled coils and structured formations at its manufacturing facility located in Haryana and Madhya Pradesh.

The lighting division has two manufacturing facilities in Uttarakhand and Madhya Pradesh. The promoter group owns about 63% in the company.

The firm’s lighting business is considered as a mature commodity business with global players like Philips and Osram and domestic players like Bajaj being the leaders in the market. The sector is seeing an uptick with the government’s focus on subsidising the LED lights as part of its efforts to spread the message of energy efficiency.

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Surya Roshni’s lighting biz gets bids from Warburg Pincus, Bain Capital

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