Actis

What can KILL the idea

Premier SOEI

SHs

European subsidiary acquisition

< 500 Shs

66%

NO transaction since 2007

2.9% 6.7% 8.5% 75 holders

> 10K Shs 7.7% 6.7% SOEI - LIQUIDATOR

Process for hive off of CFL division Completed Advertisement exp reduced by HALF in FY 13. European acquisition completed

12% of shares in PHYSICAL FORM 5.3% retail

Recent positives

Halonix

Exports MOST PROBABLY should revive

Business

Key risks What has gone wrong Till FY12 Cash basis Warranty claims FY 13 - accrual basis

Accounting policy

Theme

Mgt quality

ContrarianValueEdge.com

AM 15% market share [Europe] 04-12

50% [Auto]

90-100crs/pa

Exports lower due to lower capacity Capacity constraints FY10 & FY11 AR 80% under PRIVATE labels

Exports CFL [50%]

ONLY 20% under OWN Brands Germany France

Majority Europe

50% market share in Passenger vehicles 30%

Luxemburg

OEM [30%]

80% market share in 2W ONLY MAJOR MANUFACTURER IN INDIA

Not much

OEM AM

China dominates China price < 25% of Halonix

Approval from OEMs No other local manufacturer

Business

CFL

Auto

Entry barriers

Private Labelling AM [20%]

Foreign players import from China

Bosch [Mico] Osaram

Buys LAMPS from outside

Auto lamps [50%]

Lumax Osaram

Indian competitors Both imports from China Price 10% less than Halonix

Peers 11-13

Bosch

Gained market share in OEM

Noida plant Auto lamps > 75% of rev EBITA margin 15-20% 1992-96

ROE & ROCE > 20% RM imports = 50% RM Exports c10%

ContrarianValueEdge.com

Negligible

Tangible FA

12 crs Intangible 5.8 crs annual charge

4x EBITDA

BS analysis Aug 2010

Excess liabilities = 50crs

Abruptly cancelled

European subs

Third party purchase > 70%

EV = 25crs

Only trading Emp fixed cost = 3.5crs per quarter Selling commission = 8%

INR 60 crs

2013 P&L

LOSS making Equity value 25L

Frieght O = 2.3% of sales Rent = 1.4cr

ContrarianValueEdge.com

Not within 2 yrs

Breakup of Euro

Highly uncertain Euro crisis

50% of Auto lamp sales from EXPORTS

IT liability of INR 50crs

Supply to AM not OEM

Key risks 50% of RM is imported

ContrarianValueEdge.com

Both CFL & auto lamp RM 50% each Chk 1992-1996 data, Auto contributes > 75% to revenues

Planned to sell CFL business to PROMOTERS without INVITING ANY BIDS

Disclosure in AR quite DECENT

Mgt quality Hive off in 2010-11, called off without GIVING any Reasons

ContrarianValueEdge.com

3-4 yrs

Hive off of CFL business

Growth of Auto

Theme

1 YR Completed on 2 September 2013

1-2 Yrs bought in 2006

EXIT of PE fund

Fund set up in Aug 2005 ACTIS End of 2015 Redemption Assuming Max life 10 yrs

ContrarianValueEdge.com

IMPACTED exports

European acquisition cancelled

Automobile SLOWDOWN

CFL incurring losses

What has gone wrong

UNIFI capital sued the company

Frequent chg in MD

De-rating after aborted stake sale

ContrarianValueEdge.com

PE sell AUTO business to themself at CHEAP VALUATION

Exports decline prove PERMANENT

What can KILL the idea NO EXIT OF PE FOR MORE THAN 3 YEARS

ContrarianValueEdge.com

EV = 160 Crs Loss making CFL business hived off

CFL valuation

Reduced risk

Fy08-14

EBITA margin = 12%

EBITA loss = 140crs

EV/Sales = 0.6x

100-110/sh

29 September 2013

BV zero

Now debt free BS

Pessimistic

Actis paid good valuation for CFL

Multiple = 12.5

Monopoly in OEM supplies for bulbs

130 - 155 / sh

Excellent strategic fit for Philips/Osaram/Mico

EBITA margin = 15 - 18% Base case EBITA multiple = 12.5x

EV/EBITA = 15-17x

Upside

EBITA margin > 25% [15 yrs avg]

Equity cap = 360 - 430crs

Shanti gears PB = 3x

230 /sh Equity value = 650crs

Take overs

Why

Optimistic

Industrial gear box maker EV/EBITA = 12 - 18x [3yrs avg/TTM]

EBITA margin = 20% Amtek auto

EBITA multiple = 17x

EBITA margin > 11% [15 yrs avg]

Recent deals PB = 2x EV/EBITA = 14x

Price = 53 Fairfiled atlas

EBITA margin 11% Auto sales of 200crs

EBITA margin = 18% [2 yrs avg] EV/EBITA = NM

EBITA multiple of 8x

Denso India

50% probability of I. Tax liability 55crs

Ultra low probability

BV = 2x

Betting bank

Current M cap = 150 crs Actis invested in 2006 at ~ 17x EV/EBITA

Selling to themselves Earlier bids

Ultra low probabiity Philips/ Osaram/ Bosch

BV = 6x

Delisting

What's implied at current price

Philips offered 400-450 crs Philips

Not getting any suitable buyer

Auto EBITA in 2010 = 45crs Implied EV/EBITA, assuming nil debt = 10x

Cost price = 190/sh Exports stable 2008-09 at 100 crs

By end of Dec 14

FY 06 = 80crs Euro crisis FY 13 = 90crs

Within one year

Peak = FY 10/11 = 125 crs

Prolong economic slowdown

Local

What can still go wrong

More exposure to 2W Employee = 14crs/pa Rent = 5.6crs/pa

INR 20 crs of fixed expenses

Possibility of synergy for Philips/Osaram Losses from Europe Subsidiary 33% purchase from Halonix Majority from third party

Current MD trf to Light division New MD appointment only for a year

50% to exports Exposure to CV very less

CFO appointed as MD

FY13

FY14 Sales > Halonix, margin improve Should not matter Already reflected in price and sales

Not able to run business properly

Little scope to worsen the situation

ContrarianValueEdge.com

TTM = 10%

Phoenix Lamps_Mindmap.pdf

CFL [50%]. Auto lamps [50%]. OEM [30%]. 30%. 50% market share in Passenger vehicles. 80% market share in 2W. ONLY MAJOR MANUFACTURER IN INDIA.

97KB Sizes 4 Downloads 117 Views

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