Crompton Greaves To Acquire Butterfly Gandhimathi For 'Full Kitchen Play'

Crompton Greaves Consumer Electricals Ltd. will acquire a controlling stake in Butterfly Gandhimathi Appliances Ltd. as part of its long-term strategic goal of becoming a leader in the small domestic appliances segment.

The consumer durables company has signed definitive pacts to acquire up to a 55% stake for about Rs 1,379.7 crore, according to an exchange filing. That equates to Rs 1,403 a share of Butterfly, a 0.84% premium over the kitchen appliance maker’s Tuesday’s close. Crompton will also purchase certain Butterfly trademarks from promoter group entities for Rs 30.38 crore.

According to SEBI norms, Crompton will launch a mandatory open offer to the public shareholders of Butterfly to acquire a 26% stake at Rs 1,433.9 apiece. The transaction, the filing said, is expected to be financed through a mix of internal accruals and debt.

Tamil Nadu-based Butterfly is a maker of mixer grinders, wet grinders, pressure cookers, and non-stick cookware, among others. It is among the top three pan-India kitchen and small domestic appliances players, the filing said.

For the nine months ended December, Butterfly’s revenue stood at Rs 806 crore, up 22% over the year earlier. Its Ebitda came at Rs 75 crore during the period. In FY21, Butterfly reported revenue worth Rs 870 crore—a compounded annual growth rate of 21% over FY17-21.

Crompton in the filing said, “Backed by ready manufacturing and R&D infrastructure, Butterfly creates a strong opportunity for innovation and expansion in core and adjacent categories and is expected to unlock synergies for both companies."

Shantanu Khosla, managing director at Crompton, said the deal sets up a platform for a “full kitchen play” for the company. “Butterfly’s proven channel and brand strategy will form the base for a stronger small domestic appliances business led by mixer grinders.”

For Butterfly, the filing said, this “step will provide an opportunity for the brand to achieve pan-India reach”.

ICICI Securities said the acquisition would help Crompton have a stronger connect in south India, expand distribution network and reduce over-dependence on its sole ‘Crompton’ brand.

“With the acquisition of Butterfly, the company will have access to two strong brands which will relatively de-risk the business model. Assuming 5% synergy benefits by FY24, the acquisition will lead to earnings accretion. There will be synergies in raw material sourcing, distribution, media sourcing and distribution,” the brokerage said.

ICICI Securities maintained a ‘buy’ rating on Crompton, citing a 26% drop in stock price over the past six months. It set a target price of Rs 504, a potential upside of more than 32%.

Shares of Crompton Greaves gained as much as 4.4%, the most in a week, after the deal was announced. Butterfly Gandhimathi, too, rose about 2.3%.

Of the 43 analysts tracking Crompton Greaves, 37 recommend a ‘buy’ and three each suggest a ‘hold’ and a ‘sell’, according to Bloomberg data. The average of the 12-month price targets implies a 35.7% upside.