Haier Appliances India is the third-largest appliances company in the country after LG and Samsung.
The company is working with its global advisor, Citi, to reach out to Indian groups that don’t have a competing business.
While Haier has told potential suitors that it is looking to dilute up to 25%, the people cited above said this could go as high as 49%. A joint control mechanism—with the Indian partner as the single largest shareholder and a local management as a precursor to a local listing—is also likely to be on the table, the people said.
Haier didn’t respond to queries.
The Chinese company that entered the country in 2003 is hopeful of striking a deal at a premium, benchmarking its business operations to LG Electronics India’s expected valuation ahead of a planned IPO.It’s been reported that the South Korean company is looking to raise $1-1.5 billion next year, valuing LG Electronics India at $13 billion.However, most executives expect a valuation of $2-2.2 billion for Haier, half of what the company is said to be quoting, predominantly on account of its Chinese parentage.
The consumer electronics manufacturer is not keen on partnering groups that have a competing business to avoid conflicts of interest, thereby ruling out Tata, Godrej or even Reliance Industries as of now, said the people cited. It’s also looking at entities that have the ear of policy makers, to help expedite growth and ringfence local operations and Chinese employees.
“Haier wants a strategic Indian partner who is not in the durables business but will help them to deal with the bureaucratic maze and in political corridors, considering the geopolitical tensions between India and China,” an industry executive said. “It wants to speed up approvals and investment. Financial investment or liquidity in the Indian entity is not the main criteria—it is a profitable operation that is growing in India.”
Make in India
Ahmedabad-based Torrent Group, Dabur and Sajjan Jindal’s JSW Group are diversifying fast and have been exploring unique investment options or alliances in sectors such as financial services, retail, real estate, automobiles, sports and entertainment. For instance, Torrent bid for Reliance Capital and is eyeing the Gujarat Titans Indian Premier League (IPL) cricket franchise, while the Burman family of Dabur is in a takeover battle at Religare and had made a strong pitch for Coca-Cola’s bottling operations in India.
Billionaire businessmen such as Sunil Mittal, Sunil and Pawan Munjal, Gautam Adani, Uday Kotak, Azim Premji and Infosys chairman NR Narayana Murthy have well-established family offices that are making bold bets.
A few of them have already been sounded out, said the people cited earlier, adding that the discussions are preliminary and are expected to pick up.
Private equity funds will also be approached, but those with US limited partners (LPs) may face similar geopolitical challenges in investing in a Chinese company.
Industry premium
Haier competes with LG, Samsung, Whirlpool, Havells-owned Lloyd, Godrej Appliances and Voltas Beko. LG India is the largest in the appliances segment by sales.
Indian consumer appliance stocks such as Havells, CG Consumer Products, Whirlpool India and Voltas, trade at three times revenue, about twice that of peers in developed markets, on account of growth. This translates to an average price to earnings multiple of 50-60 times for the category in India, according to analysts.
Haier India sales rose 17% from the year before to Rs 6,350 crore in 2023 and turned profitable, according to Registrar of Companies (RoC) filings sourced from business intelligence platform Tofler.
In 2023, the company posted a net profit of Rs 154 crore, compared with a net loss of Rs 63 crore in 2022. Haier follows a January-December fiscal year in India. In FY24, the company is expected to clock ebitda of Rs 600 crore.
Last year, the consumer electronics maker applied to the Department for Promotion of Industry and Internal Trade (DPIIT) to infuse Rs 1,000 crore of capital via parent Haier Singapore Investment Holding. However, approval is yet to come through, said government officials in the know.
Haier has big investment plans for India, including expansion of plants in Greater Noida and Pune, and setting up a third greenfield facility in the south, for which it is seeking land in Andhra Pradesh and Tamil Nadu. Capacities will be saturated at the Pune and Greater Noida plants in another two to three years, going by current pace of growth, an industry executive said.
India began scrutinising investments by Chinese firms following the worsening of bilateral ties after border skirmishes in June 2020. Press Note 3 norms issued in 2020 stipulated that a company based in a country that shares a land border with India (such as China) can invest only after Indian government clearance, and that the automatic route was thereby withdrawn. This move impacted Chinese investment in India, even though in recent months, some proposals have been cleared.
