US-based private equity firms General Atlantic, Blackstone and TA Associates have evinced interest in Syska LED Lights Pvt. Ltd which plans to sell a significant minority stake, said two people aware of the matter, requesting anonymity.
Promoters of Syska, one of India’s leading LED (light-emitting diode) lighting solutions provider, are seeking to sell 40-49% stake in the company at a valuation of ₹3,500-4,000 crore, said the first person cited above.
“The promoters are looking to raise equity capital to deleverage the parent company’s balance sheet. While there is interest from private equity majors, the discussions are at a preliminary stage,” the person said. “The company has appointed Edelweiss as a sole adviser on the transaction.”
“The deal value could be anywhere between ₹1,000-1,500 crore,” said the second person cited above.
Syska group had outstanding debt of ₹1,174.64 crore as on 31 March 2018, according to a 30 January note by rating agency Acuité. Its debt-to-equity ratio stood at 2.43 times, the report said.
Syska LED, General Atlantic, Blackstone and Edelweiss Financial Services declined to comment. An e-mailed query to TA Associates on Wednesday remained unanswered till press time.
Promoted by brothers Rajesh and Govind Uttamchandani, Pune-based Syska LED also manufactures grooming, personal care products and home wires under the ‘Syska’ brand name.
Founded in 2013, the company gets close to three-fourths of its revenue from trading and manufacturing of LED lights and distributing them across the country.
The lighting firm’s sales grew 26% to ₹802 crore in fiscal year ended 31 March 2018, compared to the year-ago period, as per filings with Registrar of Companies (RoC). Its profit after tax, too, nearly doubled on a year-on-year basis to ₹10.2 crore, during the period.
“There have not been any private equity investments in major lighting companies such as Philips Lighting, Wipro and Havells India. So, it is most likely that there will be a lot of interest in this transaction from PE firms considering it is a consumer-facing business that is also profitable. In my view, the company should be able to get a significant premium on its valuation, owing to its strong distribution network in the country,” said Pankaj Chopda, director, Grant Thornton India Llp.
“The LED lighting market in India, which was dominated by Chinese imports earlier, is now expected to grow multi-fold, owing to ‘Make in India’ and many other government initiatives in this segment. Any market leader in this space, will therefore be a definite beneficiary,” he added.
India’s energy efficiency market is estimated at $23 billion with a vast potential to grow as the government plans to expand the use of LED bulbs in the country. While its UJALA (Unnat Jyoti by Affordable Lighting for All) scheme aims to reduce LED bulb prices, the Street Lighting National Programme, launched by Prime Minister Narendra Modi in 2015, has replaced 13.4 million conventional street lights.
Syska LED is part of Syska Group, which comprises six firms including the LED lights business.
The group started its journey as Shree Sant Kripa Appliances Pvt. Ltd (SSK Group) in 1989, as a distributor of T-Series audio cassettes, CDs, and audio-video systems. Later, the group bagged the exclusive distributorship of Samsung smartphones and tablets in Gujarat, Maharashtra, Goa, Madhya Pradesh and Chhattisgarh.
In 2012, the company acquired a Korean LED manufacturing company IST Ltd as a part of its launch of Syska LED lights in India and overseas.
This article was first published on livemint.com.