Crompton to sell automation arm for Rs 754 cr

Avantha group firm Crompton Greaves is selling its global automation business, ZIV, at a valuation of $112 million (Rs 754 crore) by September, to focus on its India businesses.

The company has appointed bankers to sell the business, which reported sales of Rs 754 crore (euro 100 million) 2015-16.

The sale of its automation business comes in the backdrop of the company selling its transmission and distribution business abroad to US-based private equity firm First Reserve International at an enterprise value of euro 115 million (about Rs 866 crore) on a debt-free, cash-free basis. Sales will include the T&D business in Indonesia, US, Hungary, France, Belgium and Ireland. Crompton expects the sale to be completed by October.

The company in April last year had sold its consumer electronics business for Rs 2,000 crore to a clutch of private equity firms and listed it on the Indian stock exchanges. The group's promoter company had sold its power business to Adani group in 2015.

During the company's post 2016 results conference, K N Neelkant, managing director and chief executive officer, said ZIV's performance was improving and the company would get stronger during the current financial year.

"From a process point of view, for any buyer's diligence, it (the sale) should take a considerably shorter time than the other deal we did. For us, the goal is to finish the ZIV deal in this financial year, subject to, of course, finding the right buyers and finding the right value," he said. ZIV made Rs 60 crore of earnings before interest, tax, depreciation and amortisation (Ebitda) in FY16 and expected to make a net profit in FY17.

Analysts say the company is in the middle of a restructuring and is on the right track.

"Successful sale of the international business will give the management the bandwidth to focus on domestic business, which has potential to grow, both on power and industrial side, over the next few years," said Kunal Sheth, an analyst with Prabhudas Lilladher, a Mumbai-based brokerage company.

On its domestic business, analysts said its industrial segment is likely to lead the recovery because of healthy replacement demand, continued spend on water and irrigation and improved traction from railways and better outlook in the cement sector.

"While sales of the standalone power business are likely to bounce back, margin recovery will be slow as few legacy orders and loss in system business which is expected to be shut down this year," Sheth said.