Crompton eyes expansion by acquiring kitchen appliances playerCROMPTON - 296 Change: -4.75 (-1.58 %)
News:According to moneycontrol, Crompton Greaves Consumer (CGCEL) is looking to buy ~50% stake in kitchen appliances player Butterfly Gandhimati Appliance for a consideration of Rs.1450 crore.
Views: Butterfly Gandhimati is a strong brand in south India in the kitchen appliances category. It has grown at a CAGR of 21% during FY17-21. It also registered a steady improvement in its financials (improvement in cash conversion cycles and EBITDA margin) in the last two years. CGCEL has a very limited presence in the kitchen appliances category with overall revenue contribution of mere 2-3%. We believe acquisition of Butterfly will help CGCEL to expand its kitchen appliances product portfolio and get access to established 500 dealer networks across India. However, at the said valuations we believe CGCEL may have to partly finance the acquisition through debt that may weigh on its overall return ratios in the near term (as Butterfly has low asset turnover compared to CGCEL). The company is yet to confirm the said news