Crompton Greaves Consumer acquires Butterfly Gandhimathi AppliancesCROMPTON - 299 Change: -2.25 (-0.75 %)
News: Crompton Greaves Consumer (CGCEL) has acquired a majority stake in Butterfly Gandhimati Appliance (Butterfly) for a consideration of ~Rs.2077 crore. The transaction includes 55% stake and trademark license from Butterfly’s promoters for Rs.1410 crore. CGCEL will also launch an open offer for acquiring 26% stake from public for a consideration of ~ Rs.667 crore (~ Rs.1434/share).
Views: Butterfly is strong brand in south India’s kitchen appliances category and has grown at a CAGR of 21% during FY17-21. It has 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 expand its kitchen appliances product portfolio and get access to established 500 dealer networks across India. According to I-direct estimate, the acquisition at 25xFY24E earnings (1.7x FY24 sales) is fairly valued for CGCEL, considering Butterfly’s strong brand and improving financials.