Engineering firm Crompton Greaves Ltd, part of Gautam Thapar-promoted Avantha Group, has received the Bombay High Court’s approval to demerge its consumer products business into a separate listed firm.
The company said on Friday its shareholders will get one share of Crompton Greaves Consumer Electricals Ltd (CGCEL) for each share held.
Avantha has been under a debt overhang and has divested several assets in the recent past. In April, the promoters inked a deal to sell their 34.3 per cent stake in the consumer products unit to a special purpose vehicle created by PE firm Advent and Singapore government's investment arm Temasek for Rs 2,000 crore.
Advent is the lead investor in the SPV. The transaction is expected to be completed in the first quarter of 2016.
Under the consumer business, it manufactures products ranging from fans, light sources and luminaires, pumps and household appliances such as geysers, mixer grinders, toasters, irons and electric lanterns.
The demerger was part of the group's plans to create independent growth opportunities for its two large but significantly different businesses - power, industrial and automation, which is a B2B business; and the consumer products business, which is B2C.
Under the B2B side, the company operates three business groups – power systems, industrial systems and consumer products, partly built through a series of acquisitions beginning a decade ago.
Last November, Avantha Group had said it may sell part of its stake in Crompton Greaves Consumer. At the time, the promoters held a 42.7 per cent stake in Crompton Greaves. Given the vertical demerger plan of the consumer products unit, it was to own a similar stake in the demerged firm.
However, soon thereafter the promoters sold a 8.3 per cent stake in Crompton Greaves for Rs 1,001.57 crore ($162 million). Part of this was bought by investment entities under Goldman Sachs and Merrill Lynch. This left Avantha with a 34.3 per cent stake in Crompton Greaves and it will have a similar holding in the demerged business under CGCEL.
Avantha Group also runs India’s largest paper company Ballarpur Industries and energy generation company Avantha Power. Besides, it has several small and medium-sized companies in processed food, IT and chemicals sectors.