Stake sale of power, consumer division biz to help Avantha group, say analysts

The consumer products business is valued at Rs 5,000 to Rs 6,000 crore

The Avantha group is said to be in discussions with private equity firms and a few multinational companies to sell a part of their stake in the proposed consumer business segment subsidiary of Crompton Greaves.

The sale will be subject to execution of a definitive agreement, Crompton Greaves said on Monday.

Last month, the Crompton Greaves board approved the demerger of consumer products business segment, which accounts for about 20 per cent of the company’s consolidated revenue. The segment manufactures lighting appliances and fans.

The consumer products business is valued at Rs 5,000-6,000 crore.

According to an industry source the stake sale in consumer products business along with sale of 600Mw of power plant in Chhattisgarh will help deleverage group debt incurred for financing of the power projects.

Under the demerger plan, a new consumer products company, Crompton Consumer Products Limited, will be formed next March. This company will issue three new shares for every four held by investors in the parent company.

Separately, Crompton Greaves will hold 25 per cent shares in the consumer products company. Avantha Group which holds about 42 per cent in Crompton Greaves, will own 32 per cent in the consumer products company and the balance of shares will be held by other investors.

While Crompton Greaves has claimed that the move would create value for all existing share holders and enable the management to focus and expand its distinct business segments, proxy advisory firms are against the move.

According to firms the demerger structure is negative for minority share holders and have said it enhances the promoter control over the consumer product company.