Havells-Lloyd deal to be earnings neutral in near term: Macquarie

Mumbai: Havells India's acquisition of the consumer durables business of Lloyd Electric for Rs 1,600 crore is likely to be neutral for near term earnings, said foreign brokerage Macquarie in a report.

"From a very long-term perspective, this strategy might make sense as Havells gets entry into a very large segment. But in the next 1-3 years, this acquisition would take large management bandwidth and potentially dilute return ratios and cash flows for the company," said Macquarie.

Macquarie said the deal marks the entry of Havells into the big-ticket segments like air conditioning, televisions, washing machines etc but prima facie, the deal would be neutral for Havells in the near term. Macquarie also said there is no synergy with existing distribution network.

"This acquisition gives Havells entry into the US$15bn Consumer durable market but there is no overlap in the distribution channel for Havells and Lloyd Electric. Havells is a premium brand in Consumer Electrical segment while Lloyd is a Tier-2 brand with presence in mainly smaller cities," said Macquarie.

The brokerage has an 'outperform' rating on Havells with a target price of Rs 404.