PE money being raised will be deployed to expand the consumer business once the non-compete clause gets over
Livguard Energy Technologies, the makers of automotive battery, inverters, power backup, mobile accessories, stabilisers and solar renewable energy, will be raising over $50 million in private equity this fiscal. A SAR Group company, the founders have already invested Rs 200 crore in the Livguard business since its inception in 2014.
Among top three players in the automotive battery space after Exide and Amaron, Livguard currently has monthly revenues of Rs 100 crore and an annual run rate of around $150 million.
Speaking with DNA Money, Rakesh Malhotra, founder, SAR Group, said, Livguard will raise capital this financial year. "Being a much bigger business, we wanted to wait and raise a large size of over $50 million," said Malhotra, adding that the Livguard business has already clocked in revenues of Rs 950 crore in March last year.
The group's water purifier business under Livpure Pvt Ltd, started in 2012, already has secured private equity investments from CLSA (two rounds – 2013 and end of 2014) and Multiples PE (single investment in December 2014). Together the investors have put in Rs 200 crore and hold under 25%. While cricket legend Sachin Tendulkar is the brand ambassador for Livpure, his fee has been structured in a manner to give him a minor stake in the company.
On whether Multiples PE will participate in this fund raising plans for Livguard, Malhotra said, "We will be going wider. There is a lot of interest and we won't have a problem. Ours is probably the only company where private investment of this scale can be made."
On the other hand, Exide and Amaron (Amara Raja) will not be raising private equity. Another private firm Luminous (build by Malhotra and now owned by Schneider Electric) is also unlikely to see any private equity funding.
"So if private investment is to be made in a private company, there is only one opportunity in that space. That's mainly the reason for so much interest in our company," said Malhotra.
Interestingly, the launch of automotive firm Livguard was through an acquisition of Schneider Electric's automotive battery business. Schneider had earlier acquired majority stake of 74% in Malhotra's inverter and inverter battery business operated under the banner Luminous.
"While we stayed involved (in the Luminous business), we were clear about being in the battery business. But since there was a non-compete clause, we were unable to do so. And continuing our association with Luminous was only extending the non-compete period. It was then decided (by Schneider) to sell their automotive battery business to us. It was a small vertical for them at just Rs 30 crore revenue in their Rs 2,000 crore balance sheet and just 30 people in the company," said Malhotra, adding that the balance stake in Luminous was sold in January 2017 and Schneider now fully owns the Luminous business.
Livguard's non-compete clause with Schneider expires this October, paving way for its re-entry in the inverter battery business under the Livguard brand by December end or early next year. "We have the necessary trappings ready viz. distribution network, brand, manufacturing etc. We are taking a cooling period before we eventually get out of our non-compete agreement and restart the business thereafter," said Malhotra.
The PE money being raised will be deployed to expand the consumer business once the non-compete clause gets over. "Expanding the consumer side of the business will help significantly increase the company's revenues," said Malhotra.
While the Rs 30,000 crore batteries / packaged power industry only offers 10-12% in earnings before interest, tax, depreciation and amortisation (ebitda) margins the scale is very large and the growth is secular. "This industry will probably grow over 10-12% a year for the next 25 years. So where will you find an industry that is already large, has that kind of growth and has high entry barriers. So if somebody is able to enter this space and position it right, the opportunity is very large. That's the reason why it's so attractive and treated as consumer business and not an auto parts business," said Malhotra. The un-organised segment is still over Rs 10,000 crore, but will end soon due to the roll-out of goods and services tax (GST), added Malhotra.
The Livguard business has its own manufacturing facility in Himachal Pradesh. Launched in May 2015, this facility makes automotive, two-wheeler and electric vehicle batteries. The company has also put up a new factory for inverter battery business adjacent to the existing one.
"We are currently implementing the project and it will get ready by the time we are set to re-enter the market. Trial runs will start by August – September and production will start in October. The total capital expenditure for this business is around Rs 250 crore and we are in the last leg which is Rs 100 crore," said Malhotra.
POWERING UP
- Will re-enter inverter battery business by December-end or early next calendar year
- PE money being raised will be deployed to expand the consumer business once the non-compete clause gets over
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