PE major Advent International buys majority stake in Eureka Forbes

Signs deal with SP Group at Rs 4.4K-crore valuation

Private equity major Advent International on Sunday signed an agreement with Shapoorji Pallonji Group to acquire a majority stake in Eureka Forbes at an enterprise valuation of Rs 4,400 crore.

Eureka Forbes (EFL), a 100% subsidiary of Forbes & Company, would be demerged into a standalone company, and then listed at the stock exchanges. Upon listing of EFL, Advent would purchase up to 72.56 per cent of the company’s then outstanding stock on a fully diluted basis from SP Group. Advent would make an open offer, according to Sebi's takeover regulations. 

According to the Forbes & Company's annual report disclosures, EFL had gross debt of Rs 285 crore for the year ending March 2021, while cash & bank balance was Rs 23 crore and liquid investment in mutual fund units was Rs 86.2 crore. If these are adjusted from the enterprise value (which is equity plus debt plus cash & bank balances), the equity value for EFL would translate to around Rs 4,250 crore. Consequently, Shapoorji Pallonji Group may end up getting around Rs 3,100 crore for its 72.56 per cent stake in the standalone listed Eureka Forbes.

SP Group had to sell the company because of its commitment to the lenders, according to their requirements for one-time restructuring (OTR) of debt as approved by the banks last year. The OTR was approved after the company defaulted on loans; the proceeds from the EFL deal would be used to repay the lenders.

“We are pleased that Eureka Forbes Limited, a jewel in Shapoorji Pallonji Group has found a new home with Advent, while at the same time unlocking value for shareholders. This transaction also reflects our stated objective and strategy of significant de-leveraging and focusing on our core competencies and businesses. We thank the EFL family of employees and stakeholders, and firmly believe they will benefit from this transaction,” said Jai Mavani, executive director, Shapoorji Pallonji and Company. 

On the other hand, Shweta Jalan, managing director, Advent India PE Advisors, said: “Eureka Forbes's Aquaguard brand is a household name in water purification, helping safeguard the health and well-being of a large segment of the Indian population. We look forward to working with Marzin Shroff and his team to guide EFL’s next phase of growth and solidify its market leadership.” 

Eureka Forbes was set up in 1931 and its parent firm, Forbes & Company, traces its origins to 1767 when John Forbes from Scotland started his business in India. Over the years, the company’s management moved from the Forbes family to the Campbells, then to the Tata group, and finally to SP Group. 

During this period, Forbes & Company went through a series of mergers and demergers, and had to disengage from different businesses. Initially known as Forbes Gokak Limited, the company was renamed Forbes & Company on October 25, 2007. SP Group holds 73.85 per cent of the paid-up share capital of Forbes & Company.

Post-various divestments and business discontinuations, in terms of revenue contribution, on a consolidated basis, EFL contributes more than 80 per cent to its total operating income.