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GLOBAL FOOTPRINTS DOMESTIC LEADERSHIP
• Founded in 1971 with the acquisition of ‘HAVELLS’ brand; headquartered in Noida • Leading domestic player in consumer and industrial electrical products • Expanded global reach through Sylvania acquisition in 2007 • Largest Indian electrical products company with revenues in excess of USD 1 billion • Presence across 5 continents, 50 countries with 94 branches and over 5000 professionals • Manufacturing facilities spread across India, Europe and Latin America • An Indian Multinational – capitalising on its domestic leadership to generate superior global cash flows 2
AN INDIAN MULTINATIONAL Europe Major Presence through Sylvania 42% of Consolidated Revenue (70% of Sylvania) 4 Manufacturing Units Strong Distribution Channel India Major Presence through Havells India 42% of Consolidated Revenue 8 Manufacturing Units Strong Distribution Channel Latin America Presence through Sylvania 16% of Consolidated Revenue (27% of Sylvania) 2 Manufacturing Units Strong Distribution Channel New Targeted Markets: China. Asean region and Latin America 3 .
technology absorption.000 • Early 2000 setting up World Class manufacturing facilities with large scale.000 40.000 30.000 New Products: CFL.000 Traditional: Switchgears and Cable & Wire .000 Acquistion: Sylvania Merger: Crabtree EWA and Bath Fitting 20. consumer products • 2007 global acquisition • 2009 consolidate and grow 4 . Luminaries. foreign collaborations. Fans and Motors 10. product addition through acquisitions 60. .Target export market – slow and tardy - FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 History Rationalization Product Additions/ Merger/ Acquisition Growth operation • Mid 2000 shift to branding.setting up R&D centre .focusing on global competitiveness on cost and technology in billions of Rupees 50.HISTORICAL GROWTH • 80-90s expanded distribution reach.
international quality products • Cost rationalisation in Sylvania to generate superior.KEY GROWTH DRIVERS • Construction and infrastructure segment • Increased branding of hitherto ‘commoditised’ products – wires and cables • Consolidation from unorganised to organised segment • Strong focus on dealer relationship – deep.a key differentiator in distribution led Indian businesses • Greater distribution penetration – reach out to towns upto 1 lac population by 2010 • Increased brand awareness creating consumer induced demand pull • Globally benchmarked manufacturing plants for lowest cost. passionate. stable cash flows • Sylvania to be global platform to launch higher value add products like switchgears 5 . sustainable.
000 mn Competitors Position .Mkt Share • HAVELLS ~ 20% • MDS/ Legrand • Schneider Industrial Switchgears – Market Size ~INR 20.000 mn Competitors Position .000 mn Competitors Position . market data 6 .Mkt Share • Phillips • Bajaj • Crompton Greaves • HAVELLS ~ 10% Fans Market Size ~ INR 20.Mkt Share • Phillips • HAVELLS ~ 9% • Osram Luminaries Market size ~ INR 20.DOMESTIC LEADERSHIP – TOP 3 IN ITS PRODUCT CATEGORIES Switchgears Cable & Wire Lighting & Fixture Electrical Consumer Durable Domestic Switchgears – Market Size ~INR 12.Mkt Share • L&T • Siemens • Schneider • HAVELLS ~8% Electrical Wire Accessories Market Size ~INR 10.Mkt Share • Anchor – Roma • CRABTREE – HAVELLS ~11% Power Cables – Market Size ~INR 80.000 mn Competitors Position .000 mn Competitors Position -Mkt Share • Finolex • HAVELLS ~ 9% • Polycab Energy Savings LampMarket Size ~ INR 10.000 mn Competitors Position.000 mn Competitors Position .Mkt Share • Polycab • HAVELLS ~ 8% • KEI Wire – Market Size ~INR 40.000 mn Competitors Position .Mkt Share • Crompton Greaves • Orient • HAVELLS ~ 14% Management estimates.
one stop Havells products shop Unique initiative to promote electrical products on FMCG model and create lasting differentiator 7 . IPL. ICC Champions Trophy. IPL Champions League • Increasing media spends • Consistent brand messaging and positioning through Havells Galaxy. visibility and recall • Sponsored Cricket T-20 World cup.SIGNIFICANT BRAND FOCUS • Patronize cricket – strong brand connect.
CFLs and Fans • Low cost.WELL SPREAD GEOGRAPHICAL MIX REVENUES • Western markets traditionally weak – a challenge and an opportunity • Strong growth in Eastern markets • Significant leadership in Northern and Southern region West – 16% Revenues North – 33% East – 20% South – 31% PRODUCTION FACILITIES • Large investments in the recent past to create global benchmarked production facilities • Largest facilities in India for MCBs. global quality products to effectively compete against any international product in India and overseas • Sylvania to source CFLs from Havells and possibility of launching switchgears 8 .
declining in recent years owing to lag effect in Sylvania investment and new business of electric motors • Capex in existing products continue to provide short pay-back periods [3 years] • RONW decline steeper due to funding of recent investment through issue of shares 200 150 EBDITA 100 PAT 50 0 2005 2006 2007 2008 2009 60% 50% 40% 30% 20% 10% 0% 2005 2006 2007 2008 2009 ROCE RONW .SUSTAINED FINANCIAL GROWTH 250 in millions of Rupees • 5-year EBDITA and PAT CAGR in excess of 40% • Stable margins holding competitive pressure and high revenue growth (37% 5 yr CAGR) • ROCE in mid 40s initially.
000 6.0% 21.4% 20.000 2.534 5.5% 4. • Increasing EBIDTA margins due to reduction in fixed cost base.FY 09 --------------------- FY 10 • Whilst new products are under consideration.4% Contribution % ----------------------.4% 19.IMPROVING MARGINS Net Revenue in millions of Rupees • Net Revenue growth in each segment except cable & wire.0% 5.3% 11.000 4.000 5.000 Q1 5.1% Q1 Q2 Q3 Q4 EBIDTA % Q1 17.0% 15. decline in material cost with better price realisation and increased contribution from cable & wire 7.FY 09 --------------------- FY 10 25.736 5.000 1.862 Q2 Q3 Q4 Q1 ----------------------.853 4.000 3.0% 12. the existing product range could generate significant growth in the next 2 years 10 . which has also grown in volume terms.2% 10.0% • Branding.0% 10.4% 10.860 5.3% 12. cost focus and dealer management would sustain increased margins • Growth to accrue from greater distribution network. better product and distribution management and aggressive marketing strategies 20.0% 0.
879 1.25 FY08 6.319 703 4.655 3.852 1.662 39% 31% 10 0.659 23% 18% 10 0.STRONG FINANCIALS • Private placement of shares to Warburg Pincus for USD 110 mn at average price of Rs 650/share • In addition to current investments in Sylvania.9 Net Worth Total Debt Net Fixed Assets Investment Net Current Assets ROCE RONW EV/ EBIDTA (times) EV/ Sales (times) Ownership Structure .490 358 3. vast European and growth oriented Latin American & Asian markets 11 in millions of Rupees FY07 2.624 560 2.422 35 844 47% 47% 13 1.9 FY09 9. there are debt and equity commitments of Euro 32 million • Sylvania has a non-recourse loan of Euro 116 million which is neither guaranteed nor obligated to Havells India Limited • Sylvania has recently renegotiated its loans facilities with banks providing for a deferment of its amortisation for 2009 and 2010 • Sylvania provides a strategic long term value platform in the high margins.648 1.
PLANNED CAPEX • Capex to be substantially funded through internal accruals and balance by loans • Largely focused on meeting increased demand in existing product categories • There was some planned slowdown on capex in FY 2009 resulting in ‘bunching’ in 2010 • The current capex would be sufficient for doubling of revenues except for some balancing capex • It would also cater to increase supply of products to Sylvania.CFLs/Switchgears • Expected payback of 3 years in millions of Rupees FY09 Actual 370 170 20 450 180 1200 FY10 Budget 350 1000 200 400 150 2100 Switchgears Cable & Wire Fans Lighting Others – IT etc. Total 12 12 .
HAVELLS SYLVANIA 13 .
rest 3% from Asia • Increasing presence in Developing Markets Lighting Source & Fixtures 14 . 6 state-of-the-art plants spread across Europe and Latin America • Above 10.000 strong distributors across the Globe • ~70% Revenue from Europe • ~27% Revenue from Latin America.5 mn • World’s No. 4 Lighting Source and Fixture Brand • 100 years old Strong Band with Global presence • Revenue of more than Euro 500 Million • Presence over 50 countries.• Acquired in April 2007 with Enterprise Value of Euro 227.
decline in revenues and profitability. funded through a non-recourse loan of Euro 120 mn and recourse funding of Euro 80 mn (current outstanding Euro 20 mn) • October 2008: Recession in Europe hits Sylvania. maiden covenant breach with lenders group • January 2009: Havells assumes effective management control. initiated 15 . a restructuring exercise to streamline fixed cost base and optimise operational footprints. Phoenix-I initiated to streamline fixed cost base. reduce working capital and procurement costs • 28 August 2009: The restructuring agreement with new covenants based on revised projections signed with lenders including deferment of amortisation till 2010 and fresh equity injection of Euro 12 million by Havells India Ltd. • September 2009: Prakram. Anil Gupta leads as COO with senior Havells personnel deployed in key European departments.CHRONOLOGY • March 2007: Havells India Limited acquires Sylvania.
15% Philips .12% Philips .600 Philips .8% GE .Global Lamp Competitors Position MARKET SIZE • • Lamps Market Size: € 5 billion Phillips being the Market Leader in each market Fixture Market Size: € 12 billion Fragmented market with dominating local players in each market Sylvania 5% GE 9% Others 38% Philips 29% Osram 19% • Market included Europe.29% GE .27% Osram .38% Osram .20% GE .5% Sylvania 2% Others 79% LATAM ~€ 277 #4 14% Asia ~€ 2.18% Osram .200 - - * The Market Matrix is as per the Best Estimate of Management 16 . Latin America and Asia where Sylvania has presence. Euro In millions Global Fixtures Competitors Position Lamps– Market Matrix* Segments Market Size SYLVANIA Position #4 Market Share 8% Other Competitors Philips 7% GE 2% Z umt o b el 11% Europe ~€ 2.
PERFORMANCE SNAPSHOT • Sylvania amongst the leading lighting brand and in millions of Euro Year ending December 2007 505 116 23.9% ‐35 3 0.7% distribution companies in Europe • Adversely impacted with recession in Europe coupled with a high cost fixed base • Market performer despite confusion.2% 2009(P) 406 85 20.4% 12 16 3. drive efficiency and generate EBDITA • Total restructuring costs of Euro 38 million. uncertainty.0% 19 19 3. Net Sales Gross Profit Gross Profit % EBITDA Restructured EBDITA Restructured EBDITA % Million Euros communication breakdown and de-motivation in the last 6 months owing to significant senior management changes and lack of decisive leadership from Havells • It underpins the relevance and resilience of Sylvania brand in its operative markets • Significant restructuring plans to reduce fixed cost.Phoenix and Prakram • Substantial growth in EBDITA expected post restructuring with a 5% revenue growth 17 .8% 2008 495 116 23.
243 34.345 7.057 7.694 ‐306 ‐306 Mar 36.822 6.283 36.858 6.813 33.057 37.782 35.243 6.591 7.484 6.546 31.283 7.979 711 933 7.566 6.484 ‐419 ‐419 May 31.280 July 33.154 300 728 18 .803 7.566 185 185 Apr 34.858 36.126 6.591 588 588 Feb 37.2009 Projection vs Actual (till July) Euros in ‘000 Particulars Net Sales (projected) Net Sales (actual) Gross Profit (projected) Gross Profit (actual) Restructured EBITDA (projected) Restructured EBITDA (actual) Jan 36.694 7.262 8.137 ‐1179 (238) June 34.
RESTRUCTURING PLANS PHOENIX – 1 • Sylvania initiated Phoenix-1 in January 2009 aimed at reduction in – – – manpower working capital material costs • The plan was funded through reduction in working capital and internal accruals • Phoenix-1 has been largely successfully implemented with benefits on track 19 .
PRAKRAM • Sylvania needs to align its manufacturing base and be more lean and efficient.hence Prakram • Prakram driven by– Rationalise fixed cost base – Increase outsourcing from LCCs including China/India – Increase savings in material costs.RESTRUCTURING PLANS. value engineering. process optimization – Enhanced managerial participation by Havells • Funding Plan – The lenders would defer payment of amortisations falling due in 2009 and 2010 aggregating Euro 24 mn – Havells India would invest Euro 12 million as fresh equity to part finance Prakram restructuring 20 .
recourse debt repaid .recourse debt to be repaid over 2009-2012 . Additional equity proposed in FY10 €7 € 23 € 14 € 94 -€ 10 € 20 € 8.5 € 12 € 50 € 50 21 . Sylvania debt with recourse to Havells . Equity invested by Havells in Sylvania at the time of investment (2007-08) 2.additional working capital debt guaranteed by Havells* Total current exposure (1+2) 3.HAVELLS FINANCIAL EXPOSURE TO SYLVANIA March 2009 June 2009 in millions of Euro 1.5 € 88.
rationalise manpower. hitherto being exercised on sidelines Financial • Sylvania revenues for 2009 are estimated at euro 400 million (INR 2.680 crores) • Havells has initiated restructuring plan to reduce the fixed cost base.SYLYVANIA – STRATEGIC AND FINANCIAL RATIONALE Strategic • Europe. continues to be a large market with attractive margins for a low cost manufacturer • It is a tough market to access without an established brand and distribution network • The low cost product cannot be a sole penetration criterion as reflected in absence of any Chinese or Indian products in these markets • The Sylvania acquisition provides Havells a platform to introduce more products in particular. switchgears • We believe that rationale for acquiring Sylvania has not eroded but would require leadership and directional support from Havells. stable cash flows and marginal capex requirements • We believe Sylvania would contribute significant shareholder value in the medium terms to Havells Shareholders . though sluggish. increase margins through select outsourcing whilst retaining European identity • Havells has limited further exposure of Euro 28 million with no recourse to existing loans of Euro 116 million • Sylvania could provide sustainable ROCE of 14% and RoE of 16% with superior.
EPILOGUE • Havells is well positioned for growth in domestic markets through a stronger brand. distribution network and vast product range • Sylvania would be cost competitive through current restructuring and presents a good platform for electrical products having a strong brand lineage and distribution network across Europe and Americas • Havells has robust cash flows and comfortable leverage to meet its planned capital expenditure for medium term • The Company is open to inorganic growth in domestic markets in its related areas • The economic environment including the thrust on infrastructure and upturn in real estate markets augur well for Havells end user markets • We believe that Havells is uniquely positioned to aggressively target growth through organic and inorganic means in the medium term .
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