The objective of stake sale proposal is to pare debt and unlock capital

Eveready Industries India Ltd. (EIIL), the flagship company of B.M. Khaitan family-controlled Williamson Magor Group, has mandated Kotak Mahindra Bank to scout for either a strategic or a financial partner. Best known for its dry cell batteries and flashlights, EIIL recently diversified into the FMCG (fast-moving consumer goods) segment.

Growth opportunities

The proposed stake dilution is aimed at unlocking capital to reduce debt (at about ₹350 crore now) and increase growth opportunities for the new businesses of LED lights, small home appliances and FMCG, including confectioneries.

EIIL, which is planning to trim debt to ₹100 crore by the first quarter of fiscal 2020, is now trying to sell its Hyderabad land. It sold its land in Chennai for ₹100 crore last year. Even as EIIL’s stock rose and volumes spurted on reports of stake sale and talks of new partnerships, the company refused to comment on the matter. Managing director Amritanshu Khaitan could not be contacted.

The promoters’ stake in EIIL is about 45% now. Depending upon the valuation, a stake dilution of up to 20% may be acceptable to the Khaitans, according to industry experts. The company is seeking a valuation of about ₹4,000 crore, it is learnt. Besides an over a century-old legacy brand, the deal offers to the strategic partner a one million-strong country-wide direct distribution network with rural penetration. “The extensive network is attractive to any multinational dry cell battery-maker keen to enter the Indian market as well as to any financial service provider, who could utilise this to sell its financial products in an under-penetrated market,” said a source on condition of anonymity.

In a report on EIIL, Kotak Securities said that battery sales were projected to rise after a prolonged disruption through a mandated BIS compliance (by April 2019), which can lead to reduced imports of Chinese batteries.

EIIL sells over 1.2 million batteries and 25 million flashlights annually. The company closed 2017-18 with a revenue of ₹1,694 crore. Profits stood at ₹114 crore last fiscal. EIIL operates in six segments – batteries, flashlights, lighting and electrical products, small home appliances, packet tea and FMCG (confectioneries). The last two are through two JVs.