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Surya Roshni to split up LED and Consumer Durables Business

Surya Roshni?has indicated that it intentions to separate its two business verticals – Lighting and Consumer Durables and Steel Pipes & Strips, in the recent BSE filing. Because the two companies are not inter-related and have different business dynamics, the company has indicated its business reorganization committee to think of alternative strategies of re-organization or de merger of the two business verticals.

The talks of de-merger of Lighting and Consumer Durables business have already been taking since several months or two. According to earlier media reports, private equity firms – Warburg Pincus and Bain Capital were interested in buying its lighting business. Another strong contender inside line was Crompton Greaves Consumer Electricals.?However, subdued performance from the Steel Pipes & Strips division was obviously a concern that could have prevented an easy demerger. Therefore, in 2019 the corporation merged its associate company, Surya Global Steel Tubes (SGSTL) rolling around in its Steel division. SGSTL can be an exports-focused unit with cost advantages over others and so, the merger is anticipated to raise margin and returns of that steel business at the same time. Hence, we presume the de-merger may gain advantage the verticals because they will concentrate on their core competencies and follow an unbiased growth trajectory.

The company’s Lighting and Consumer Durables division has reported subdued 9MFY18 results. Its revenue has exploded by 0.5% to Rs996.1cr, while EBIT margin was down from 8.8% in Q3FY17 to eight.1% in Q3FY18. The EBIT for 9MFY18 stood at Rs80.7cr. During 9MFY18, lighting division has contributed ~28% to total revenues of your company. Light-emitting diode (LED) lighting is a primary product of this division which includes grown 38%yoy during 9MFY18.

In FY17, Lighting and Consumer Durables division had revenue of ~Rs1,349cr and contributed ~40% for their revenues. The ROCE for this business in FY17 was ~17%. Within this division, lighting business with the company have been impacted resulting from phasing outside of compact fluorescent lightbulbs (CFL) with the market as a consequence of migration towards light-emitting diode (LEDs), this is a better made and even more energy-efficient option. The organization has now launched premium collection of LED down-lighters, street lights and flood lights. The organization in addition obtained contracts for way to obtain LED street lights and other lighting products worth Rs220cr (without taxes) from EESL.

The Lighting and Consumer Durables division also includes appliances which include fans, kitchen appliances, etc. During FY17, the quantity boost in LED business was 77% yoy, whereas the fan and residential appliances business grew by 55% yoy. In FY17, the fans segment had 3% business of your total Indian fan market and achieved sales of Rs180 cr in FY17.

Surya Roshni has endemic market network of over 2,000 distributors and a couple of lakh countrywide retailers across PAN India and exports to substantially more than 25 countries globally, throughout the Middle East, Europe, Africa and Asia.