Maintain ‘buy’ on Havells India with a target price of Rs 275 per share. We continue to like the stock given its strength in domestic business. Exit from Sylvania will help management enhance its focus on domestic operations. We believe the company will be one of the major beneficiaries post the slowdown in the domestic business eases as it continues to invest in its brands and distribution network.
As per reports, Havells is looking at exiting Sylvania, the European lighting company it acquired in April 2007 for Euro 227 million. Havells is said to be negotiating with global lighting players including private equity firms and expects to conclude the deal by December 2015 in two phases. In first phase, majority stake will be offloaded and management will cede control over the company as well.
The residual stake will be offloaded over next 3-5 years in the second phase. In the past 8-9 years, Havells had invested over Rs 10 billion in Sylvania and tried to revive its loss-making operations through restructuring and cost cutting exercise, but met with limited success. Thus, the move to exit Sylvania is part of the company’s plans to enhance its focus on the domestic market. We believe this will be a positive for the company as it will free up management bandwidth from international operations.
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