Crompton Greaves to sell T&D business
Crompton Greaves Ltd said it would sell its overseas power business to a US private equity fund for an enterprise value of $126.1 million. The company said it would sell its transmission and distribution business in Europe, North America and Indonesia to First Reserve International Ltd. In a statement, the company said that it was considering the sale of more overseas assets as well.
Col. R. E. B. Crompton founded R.E.B. Crompton & Company in 1878 and the company was merged with F.A. Parkinson in 1927 to form Crompton Parkinson Ltd. Greaves Cotton and Company was appointed as their concessionaire in India. In 1947, Lala Karam Chand Thapar, an Indian industrialist, bought Greaves Cotton and gained control of Crompton Parkison Works, Greaves Cotton and Crompton Parkinson Company.
The name Crompton Greaves Limited was adopted on 2 August 1966, following a court-directed amalgamation of Greaves Cotton and Crompton Parkinson Ltd in India. Since then it has evolved into one of India's largest private sector enterprises under the Avantha Group conglomerate.
CG has several businesses that manufacture consumer goods as well as heavy machinery and electrical components and products. Their major operations focus on making power systems including transformers, reactors and transformer and switchgear components. It also manufactures industrial systems like generators, alternators and motors. Under their consumer appliance business, CG manufactures several household appliances including fans, kitchen appliances and home security packages.
After the acquisition of the Belgium-based Pauwels Trafo/Pauwels Group in May 2005, CG was ranked amongst the world's top ten electrical transformer manufacturers. A streak of subsequent acqusitions enabled it to establish its presence in several countries including USA, France, Spain, Hungary and Ireland.
CG fell victim to the economic downturn in the global market as its international businesses began slowing down, severely affecting the comapny's profits. CG's international business constitutes 51% of its overall revenues. Its international businesses have faced several issues due to order execution delays, liquidated damages and quality issues. Officials said their North American businesses in USA and Canada were of particular concern.
Crompton Greaves shares crashed nearly 30 per cent, following the power products manufacturer's December 2015 quarter earnings announcement. The announcement led to severe erosion in Crompton's market capitalization and hit investors. On a consolidated basis, Crompton Greaves posted a net loss of Rs.107 crore in the quarter ended December as compared to a net profit of Rs.274 crore in 2014.
"The sale will enable the company to reduce debt and focus on its faster growing Indian businesses. The company continues to actively examine its other international B2B bsuinesses with a view to monetise these businesses to enhance shareholder value." - CG statement.