RBI allows 100% FII in Crompton Greaves Consumer Electricals

The Dollar Business Bureau 

The Reserve Bank of India has allowed foreign investors to buy 100% in Crompton Greaves Consumer Electricals Ltd (CGEL). In a notification released to the press RBI said, “Foreign Institutional Investors (FIIs)/Registered Foreign Portfolios Investors (RFPIs) can now invest up to 100 per cent of the paid up capital of Crompton Greaves Consumer Electricals Limited under the Portfolio Investment Scheme (PIS).” 

The company, Crompton Greaves had passed special resolutions in its Board of Directors meeting and in its shareholders’ meeting, agreeing to enhance the limit for the purchase of its equity shares and convertible debentures through FII’s and RFPI’s. 

Mention needs to be made of the attempt made in May by private equity firm Advent International Corp and the famed Singapore state investment firm Temasek Holdings to acquire 26% stake in the open offer by CGEL for about Rs 1695 crore ($251 mn then). Though Advent managed to buy only 22410 shares, Temasek couldn’t purchase any as the price offered was much less than the trading levels then. 

As of June 2016, the promoters (Avantha Group) of the company held 34.38% shares in the household segment with the remaining 65.62% shares being held by the public. 

CGEL manufactures electrical appliances such as fans, luminaries, pumps, light sources and household appliances such as mixer grinders, irons, toasters, electric lanterns and geysers. It has been an advent by the Avantha group to demerge CGEL from Crompton Greaves in order to create growth opportunities for its other two large significant businesses – power, industrial and automation (a B2B business) and the consumer products business (a B2C business). 

The government’s rural electrification programme and a decent monsoon so far have led to an increase in investor interests in the household appliances segment, more specifically the fans and lights segment. Stocks of companies such as Crompton Greaves, Bajaj Electricals, Havells etc have posted a 50-100% returns in the past six  months. A report by Crisil also mentions that Fans and lights makers are likely to post a growth of 36 per cent and 76 per cent, respectively, from FY15 to FY20.