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Halonix looks to raise Rs 600 cr for expansion

Hong-Kong-based NewQuest Capital, via its NewQuest Asia Investment II, bought the business from Actis for an undisclosed sum in 2016. Before that, Actis bought the general lighting business of Halonix (formerly Phoenix Lamps) for an enterprise value of Rs 160 cr.

, ET Bureau|
Oct 23, 2019, 12.20 PM IST
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MUMBAI: Global private equity fund NewQuest Capital-owned lighting and electrical business Halonix is looking to raise Rs 500-600 crore from private equity investors and has appointed investment bank EY for the exercise. NewQuest bought the business from its peer Actis in 2016. The company is being valued at Rs 1,500 crore, said three people with knowledge of the development.

“The deal is at a very early stage and the information memorandum, or IM, has just gone out,” said a person involved in the process. NewQuest has appointed the investment banking division of global consulting firm EY to look for investors.

Hong-Kong-based NewQuest Capital, via its NewQuest Asia Investment II, bought the business from Actis for an undisclosed sum in 2016. Before that, Actis bought the general lighting business of Halonix (formerly Phoenix Lamps) for an enterprise value of Rs 160 crore ($23.87 million) on a slump sale basis.

“The business has since been turned around and it needs growth capital to expand and hence some of the mid-market PE funds have been approached for the deal,” said another person with direct knowledge of the deal.

The company’s portfolio of products include LED, luminaires, home decorative lighting, commercial and industrial lighting, street lighting, flood lighting, halogens and high intensity discharge lamps. It has around 800 dealers and distributors and is sold through 30,000 retailers across the country. The company’s manufacturing unit is in Haridwar, Uttrakhand.

It reported an operating income of Rs 403.7 crore for the financial year ended March 31, 2019, as against ?330.8 crore reported in FY18. Despite an increase in operating income, the company’s profit after tax was down to Rs 5 crore in FY19 as against Rs 10.8 crore in FY18.

As per a July 2019 rating release by Icra, the company has comfortable financial profile characterised by a conservative capital structure, satisfactory liquidity profile and adequate debt coverage metrics.

In an e-mailed response spokesperson for NewQuest Capital declined comment.

“While the company’s turnover grew at a healthy pace in the recent years and its operations remain working capital intensive (with elongated receivable turnover period and sizeable inventory holding requirements), its capital structure remains comfortable with no term borrowings and a healthy net worth base,” the report said. It also cautions about the company’s moderate scale of operations and volatile profit margins, amid intense competition in the domestic lighting industry.

In a market dominated by Philips, Surya Roshni and Havells, Halonix has managed single-digit market share even though it has been growing consistently around 20% and 22% in FY18 and FY19, respectively. This, at a time when the lighting industry saw a drop in growth in the same period. The company is trying to carve out a niche for itself by shifting from CFL to LEDs and launching fans, the ICRA report highlights.
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