Somany Home Innovation hits upper circuit on plans of subsidiary to purchase Building Products Manufacturing Business from HSIL for Rs630cr

17 Jan 2022 , 10:42 AM

Brilloca Ltd., a wholly-owned subsidiary of Somany Home Innovation Ltd., the fastest-growing player in the Consumer Appliances space and a leader in the Building Products segment proposes to purchase the building products manufacturing business of HSIL in a slump sale for a cash consideration of Rs630cr.

The company stock hit 5% upper circuit of Rs416 per piece during morning trade on Monday. At around 10.45 am, Somany Home Innovation Limited was trading at Rs403.20 per share up Rs6.55 or 1.65% on the BSE.

As a result, Brilloca Ltd, which is currently engaged in the marketing and distribution of building products (sanitaryware, faucets, plastic pipes, and fittings), will be backward integrated and have better control over the entire value chain, from manufacturing to after-sales. EY was appointed as independent valuation advisor for the transaction and AZB was the legal advisor.

Over the last few years, Brilloca has delivered rapid growth and the operating circumstances have also changed where it has become imperative for the company to have significant control over the entire value chain, including manufacturing, supply chain, etc. to drive sustained sector outperformance in the future. With the emerging market scenario, a refreshed strategy has been undertaken to include critical manufacturing. This will also enable the Company to make agile decisions for enhanced market serviceability, achieve greater business security, and drive strong profitable growth going forward.

The key benefits for SHIL from the proposed transaction are:

• Secure control over manufacturing processes will provide enhanced flexibility to the management to align its product placement with the evolving customer needs, strengthening its competitive position and significantly reducing Brilloca’s dependence on third party vendors.
• Given Brilloca’s strong financial position and cash availability, the Company is optimally positioned to augment its manufacturing processes and technologies.
• The backward integration will provide synergies in operations, resulting in better efficiencies.
• The transaction will help integrate the entire value chain into a single entity, thereby minimising related party transactions and reducing compliance and administrative costs.

Sandip Somany, Chairman and Non-Executive Director of SHIL said, “We always had forward looking strategies, and changed operating circumstances means refreshed initiatives. Towards that end, this acquisition is a perfect fit from Brilloca’s standpoint for secure, sustained, and accelerated business performance.

With this initiative, we will further consolidate our market standing across segments including sanitaryware, faucets, and plastic pipes and fittings, where we have been demonstrating superior sectoral growth over the last six quarters. Our appetite for growth remains undiminished and Brilloca to purchase Building Products Manufacturing Business from HSIL for Rs630cr. We look forward to continuing implementing initiatives that create incremental and sustained value in times to come.”

This transaction has been structured to provide both immediate benefits and future flexibility to SHIL to pursue its growth aspirations. As a part of this transaction, the entire operating facilities of HSIL relating to Building Products i.e. sanitaryware, faucets, plastic pipes, and fittings will be transferred to Brilloca.