Private equity major Advent International signed an agreement with Shapoorji Pallonji Group on Sunday to acquire a majority stake in Eureka Forbes at a company valuation of Rs 4.4 billion.
Eureka Forbes (EFL), a 100% subsidiary of Forbes & Company, would be spun off into an independent company and then listed on the stock exchanges. By listing EFL, Advent would purchase up to 72.56 percent of the company’s outstanding shares at that time on a fully diluted basis from SP Group. Advent would make an open offer, in accordance with Sebi’s acquisition regulations.
According to Forbes & Company annual report disclosures, EFL had a gross debt of Rs 285 crore for the year ended March 2021, while the cash and bank balance was Rs 23 crore and the liquid investment in mutual fund units was Rs 86.2 crore. If these are adjusted for the value of the company (which is equity plus debt plus cash and bank balances), the equity value for EFL would translate to around Rs 4,250 crore. Consequently, Shapoorji Pallonji Group may end up getting around Rs 3,100 crore for its 72.56 percent stake in Eureka Forbes, which is independently traded.
SP Group had to sell the company due to its commitment to lenders, in accordance with its requirements for the one-time restructuring (OTR) of debt approved by banks last year. The OTR was approved after the company defaulted on the loans; The proceeds from the EFL deal would be used to repay the lenders.
“We are pleased that Eureka Forbes Limited, a gem of the Shapoorji Pallonji Group, has found a new home with Advent while creating shareholder value. This transaction also reflects our stated objective and strategy to reduce significant leverage and focus on our core businesses and competencies. We are grateful to the EFL family of employees and stakeholders, and we strongly believe that they will benefit from this transaction, ”said Jai Mavani, CEO of Shapoorji Pallonji and Company.
On the other hand, Shweta Jalan, CEO of Advent India PE Advisors, said: “The Aquaguard brand of Eureka Forbes is a household name in water purification, helping to safeguard the health and well-being of a large segment of the population. India. We look forward to working with Marzin Shroff and his team to guide EFL’s next phase of growth and consolidate its leadership in the market. “
Eureka Forbes was founded in 1931 and its parent company, Forbes & Company, has its origins in 1767 when John Forbes of Scotland started his business in India. Over the years, the management of the company passed from the Forbes family to the Campbells, then to the Tata group, and finally to the SP group.
During this period, Forbes & Company went through a series of mergers and spin-offs, and had to disengage from different businesses. Initially known as Forbes Gokak Limited, the company was renamed Forbes & Company on October 25, 2007. SP Group owns 73.85 percent of the paid-up capital stock of Forbes & Company.
After several divestitures and business ceases, in terms of contribution to income, on a consolidated basis, EFL contributes more than 80 percent of its total operating income.