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Indo Count Industries acquires home textile business of GHCL

News: The Board of directors of Indo Count Industries has approved (i) acquisition of Home Textile business of GHCL Limited, (which includes manufacturing facilities at Vapi, Gujarat on a going concern basis) by way of slump sale in accordance with the terms of Business Transfer Agreement for a consideration of Rs.539 crores (ii) acquisition of specified assets (inventory and intellectual property) of the US subsidiary of GHCL Limited in accordance with the terms of Asset Transfer for consideration of Rs.37 crore. Out of the total consideration, Rs.340 crore is fixed consideration and the balance Rs.199 crore is towards net realizable current assets.

Views: With addition of almost 50% ( 45 million metres) new capacity, Indo Count would become the largest Home Textile Bedding company, globally, with annual capacity (post its ongoing expansion of 18 million metres) of approximately 153 million metres. Further Indo Count would be able to add a whole new avenue of customer base which is untapped, thereby leading to gain in global market share. Also it would de-risk the manufacturing facilities with twin state geographical diversity. From a revenue potential perspective the acquisition could incrementally add potential revenues of Rs.1300-Rs.1500 crores. As on H1FY22, GHCL’s home textile business reported revenue worth Rs.386 crore and PBT worth Rs.46 crore. On an annualised basis, the valuation stands at ~ 6.0x FY22 PBT, which we believe is fairly reasonable. The acquisition is expected to be funded through mix of internal accruals and debt. As on H1FY22, Indo Count had cash and investments worth Rs.280 crore and outstanding debt worth Rs.640 crore. The deal is expected to be closed by March 2022.

Impact: Positive