Consumer _ FIG Newsletter - Consumer electricals industry.pdf

Consumer Electricals Notes

1. Indian Consumer Electricals Industry
Consumer & FIG Newsletter

2. Consumer & FIG Newsletter
Contents
23
o3 Credentials
17
Transaction Landscape
07
Domestic Consumer Electricals Industry
Global Consumer Electricals Industry03
Hello Readers,
Hope you all are keeping well. It gives us immense pleasure to share
with you the first edition of our Consumer & FIG Newsletter.
The Indian Consumer Electricals industry accounts for ~USD 35 bn,
growing at CAGR of 12% YoY. The industry is witnessing increasing shift
towards organization, with the organized market constituting 80%/USD
25 bn+ in FY24. Within the Consumer Electricals industry, Fast Moving
Electrical Goods (FMEG) account for USD 28 bn growing at 12%+ CAGR,
while Small Appliances account for USD 5 bn growing at 11% CAGR.
The Consumer Electricals industry has led to the emergence of
multiple large-scale players across various sub-segments, including
Havells, Polycab, Anchor Panasonic, Surya Roshni, and Crompton
Greaves, each with revenues exceeding INR 50 billion. Many of these
players have organically diversified beyond their core product
categories and geographies. Additionally, a growing number of brands
in the Consumer Electricals segment are actively engaging with
influencers to build strong brand trust, recognizing the high consumer
involvement in purchase decisions.
We have also listed down select M&A and PE transactions concluded in
the Consumer Electricals industry till date. Additionally, we have
covered a detailed analysis of valuations and other financial
parameters of listed players across the Consumer Electricals segment,
to bring to you deeper insights into the Industry.
Hope you enjoy reading this newsletter.
From the Team
For Private circulation only2

3. Consumer & FIG Newsletter
Global Consumer Electricals Industry

4. Consumer & FIG Newsletter
Global low voltage electricals industry: USD 390 bn+; growing at a CAGR of 6%
The global industry comprises three categories of players with differentiated focus and product offerings
Global low voltage electricals industry - Overview
Global low voltage
electricals
1
Consumer
focused
electricals
Large MNC
players
Consumer focused
emerging
electricals
6%
CAGR %
2022-2025P
USD 390 bn+
Market size (USD bn)
2024 Switches
Wires and cables
Fans
Automation devices
Lighting
Categories
Switchgears
Source: Research reports
Notes: 1. Global low voltage electricals industry includes categories such as wires & cables, switches & switchgears, lighting, fans, automated devices, etc.
For Private circulation only4

5. Consumer & FIG Newsletter
Multiple players operating with strategic focus & differentiated products
Segment Large MNC players Consumer focused electricals Consumer focused emerging electricals
Focus product
segments
✓Heavy equipment
✓Industrial projects
✓Industrial automation
✓Switchgears & wiring accessories
✓Lighting
✓LV to HV wiring accessories
✓Automation
✓A/V Infrastructure
✓Low Voltage accessories
✓Lighting control
✓Home automation
✓Smart electricals
Key players
Indicative
revenue
(USD bn)
USD 20 - 100 bn USD 1 – 20 bn USD <1 bn
Takeaways
▪Players have built their franchises focusing
on the industrial segment
―Extensive focus on industrial applications
―LV offerings comprise limited segments
such as lighting, cables, and switchgear
▪Opportunistic acquisitions in the consumer
electricals segment (eg. GE – Powell Ind.
2006, Honeywell – PEHA Elektro 2010)
▪Players focused extensively on low voltage
electricals portfolio, with higher end-use in
residential applications
▪Dominate multiple sub-segments across
geographies, such as switches, architectural
lighting, cables etc.
▪Consumer-focused players have been quite
acquisitive for product or geographic
diversification
▪Emerging electricals players are leveraging
the fast-growing digital/software/IoT-led
products across sub-segments
▪Significant focus on niche product offerings
within lighting control, automation & smart
electricals
▪Players are creating a strong competitive
advantage with their differentiated, tech-
focused product offerings
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6. Consumer & FIG Newsletter
Case study: Legrand – One of the largest electricals manufacturers globally
Source: CapitalIQ; Research Reports; Notes: 1. Select acquisitions shown
Legrand has successfully used bolt-on acquisitions to build a well-rounded consumer electricals platform
Revenue (USD bn)
Revenue (USD bn) CY23
~9.3 bn
Market Capitalisation (USD bn)
27.5 bn+
Countries present in
180+
5.2
5.5
5.9
6.1
6.6
6.9
7.4 7.5
8.0
8.9
9.3
CY10 CY11 CY12 CY13 CY17 CY18 CY19 CY20 CY21 CY22 CY23
CAGR: 5%
Wires and
cables
31%
A/V Infra
15%
Digital Infra
10%
Lighting
8%
Others
36%
Revenue by category (%)
Material margin: 52%
EBITDA: 22%
30+ acquisitions
1
across categories from 2010 to 2020, amounting to USD 5 bn+
User
interfaces
Power mgmt.
solutions
Cable
mgmt.
A/V
Infrastructure
UPS
systems
Architectural
lighting
Datacenter
solutions
Energy
efficient infra
Modular UPS
& services
Smart
homes
Assisted
living
Office
solutions
COVID impact
Legrand has demonstrated robust growth through multiple acquisitions to become the #1 consumer focused electricals globally
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7. Consumer & FIG Newsletter
Domestic Consumer Electricals Industry

8. Consumer & FIG Newsletter
Brief overview: Domestic consumer electricals market
Source: Industry reports; Notes: 1. FMEG (Fast moving electrical goods) includes switches, switchgears, fans, lighting and wires and cables; 2. Small appliances includes kitchen
appliances, water heaters, water purifiers and air coolers; Excludes large appliances/white goods for this note
Breakup of Indian consumer electricals market (FY24 - USD bn)
CAGR (FY22-25P)x%
Organized market Unorganized market Overall market
FMEG
1
(USD bn)
USD 23 bn USD 5 bn USD 28 bn>>
12%
Small appliances
2
(USD bn)
USD 3 bn USD 2 bn USD 5 bn>>
11%
USD 26 bn USD 7 bn USD 33 bn
Total
(USD bn)
>>
12%
Addressable market Sector tailwinds Competitive Landscape Sector-wise consumer behavior
For Private circulation only8

9. Consumer & FIG Newsletter
FMEG constitutes 80% of the industry, growing at 12% CAGR; high share of org. market
Category share (%)
Market size
(FY24 – USD bn)
Organized market
share (%)
Growth
(FY22-FY25P)
14.9
4.0 3.9
2.0
0.9
2.3
0.8
0.6 0.5
Wires and
cables
Lighting Switchgears Fans Switches Kitchen
appliances
Air coolers Water
purifiers
Water
heaters
15%
7%
9%
12%
9%
10%
15%
13%
11%
Wires and
cables
Lighting Switchgears Fans Switches Kitchen
appliances
Air coolers Water
purifiers
Water
heaters
80% 80%
92%
80% 81%
75%
35%
50%
70%
Wires and
cables
Lighting Switchgears Fans Switches Kitchen
appliances
Air coolers Water
purifiers
Water
heaters
45% 14% 14% 3% 2%8% 2%3%8%
High penetration by the organized players across categories in FMEG with scope to grow further in small appliances categories
FMEG Small appliances
Addressable market Sector tailwinds Competitive Landscape Sector-wise consumer behavior
For Private circulation only9
Source: Industry reports

10. Consumer & FIG Newsletter
Favorable demographics and government policy support driving robust growth
Government policy support
Increasing
purchasing power
Aspirational middle
class
Rapid shift towards
urbanization
Growing real estate
market
Govt policy support
Shift towards
premiumization
Rapid urbanization
Policy Key contours
Housing for all
▪PMAY to lead to development of 3+ crore
rural houses across the country
Focus on
electrification
▪Continued focus on providing
electrification to all cities & towns in India
Smart cities
▪Development of smart cities across the
country
NIP
▪Govt looking to invest over USD 1,300 bn in
infrastructural development by FY30P
Increasing affluence driven by growing middle class
69%
43%
15%
30%
54%
78%
1% 3% 7%
FY05A FY18A FY30P
Affluent
Middle class
Aspiring
Indian middle class is burgeoning; increasing per capita
income, resulting in high discretionary spending
33% 35% 37%
67% 65% 63%
FY17 FY22 FY26P
Rural
Urban
Higher proportion of the population is expected to be
moving to urban areas, driving growth for electricals
Post-pandemic revenge spending leading to growth in
discretionary spending
Increasing discretionary spends
10
13
16
FY18A FY24P FY28P
Per capita discretionary spends (USD)
Addressable market Sector tailwinds Competitive Landscape Sector-wise consumer behavior
For Private circulation only10
Source: Industry reports

11. Consumer & FIG Newsletter
Resurgence in Real Estate market driving growth for building product segments
191
274
435
373
404
364
348
359
310
279
331 339
298
372
488
524
FY09FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19FY20FY21FY22FY23LTM
Oct-23
1.5
1.2
1.1
1.5
1.7
2.2
2.5 2.5
2.9
3.2
2.6 2.6
2.7
2.2
1.6
1.4
FY09FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19FY20FY21FY22FY23LTM
Oct-23
Sale of new housing units in top 7 cities (‘000)
Inventory of new housing units in top 7 cities (years)
Urban real estate has
started showing signs of
recovery with sale of new
houses growing by 30% YoY
in FY23 & 13% YoY in
7MFY24
Due to resurgence in the
real estate market, the new
housing inventory has fallen
to a 12-year low at 1.4
years
Addressable market Sector tailwinds Competitive Landscape Sector-wise consumer behavior
40% growth
For Private circulation only11
Source: Industry reports

12. Consumer & FIG Newsletter
Sub-segment
First purchase
decision
Replacement
purchase decision
Influencers
Product/Brand
visibility
1
End consumer
involvement
Key highlights
Wires and
Cables
▪Builder or
Contractor
▪Contractor
▪Electrician0NA  1
▪Lower consumer involvement in purchasing
decision
▪Consideration towards safety concerns
Switches/
Switchgear
▪Builder or
Contractor
▪Consumer
▪Contractor
▪Electrician2Electrician ✓ 1
▪Lower consumer involvement in purchasing
decision
▪Importance on product functionality
Lighting
▪Contractor
▪Consumer
▪Electrician
▪Consumer 4Electrician ✓ 4
▪Standard product category characterized by
limited technical complexity
▪Consumer is involved in decision making;
Influencers to play a pivotal role
Fans
▪Contractor
▪Consumer
▪Electrician
▪Consumer 3Electrician ✓ 4
▪Visible product; High importance on aesthetics
and look & feel of the product
▪Consumer prefers known brands; but doesn’t
have a preference within them
Kitchen
appliances
▪Consumer ▪Consumer 3Retailer ✓ 4
▪Importance on aesthetics and look & feel of
the product for the consumer; White goods are
visible products within the household
▪Significance of the product or brand driven by
its functionality and utility for the consumer –
Consumer usually prefers known brands
▪Brand to play a key role for the consumer;
However, significant importance placed by
customers on features of the products
Other small
appliances
▪Consumer ▪Consumer 3Retailer ✓ 4
White goods
▪Consumer ▪Consumer 3Retailer ✓ 4
High consumer involvement in purchase decision; Strong reliance on influencers
Addressable market Sector tailwinds Competitive Landscape Sector-wise consumer behavior
Source: o3 analysis based on discussion with multiple stakeholders – Manufacturers, Retailers, Consumers and Influencers
4 - High, 3 - Moderately high, 2 - Moderate, 1 - Low
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13. Consumer & FIG Newsletter
Multiple factors driving price point/brand upgrade during replacement decisions
Sub-segment Replacement cycle
Size of
investment
Challenges in
installation
Hesitance to
replace
Willingness for price point or brand upgrade
Wires and
Cables
1 20-25 years
▪Functional product, therefore, higher chance
of sticking to the same/similar brand
▪Electrician’s advice plays a key role
▪Decision for wires & cables and switchgear
influenced by consumer perception of safety
▪Decisions for switches influenced by
aesthetics, look & feel and new tech features
Switches/
Switchgear
1 15-20 years
Lighting
4 3-4 years
▪Electrician’s advice plays a key role
▪Decisions influenced by advanced features
(energy or cost efficient etc.)
Fans
3 5-7 years
▪High consumer involvement, multiple brands
evaluated prior to purchasing decision
▪Decisions influenced by advanced features
(new technology, energy efficient etc.)
Kitchen
appliances
3 5-7 years
▪Product cycles are short as new features keep
coming; Higher chance of selecting a new
brand
▪High consumer involvement, multiple brands
evaluated prior to purchasing decision
▪Decisions influenced by advanced features
(new technology, energy efficiency etc.)
Other small
appliances
3 5-7 years
White goods
2 10-15 years
Addressable market Sector tailwinds Competitive Landscape Sector-wise consumer behavior
Source: o3 analysis based on discussion with multiple stakeholders – Manufacturers, Retailers, Consumers and Influencers
Moderately FavourableHighly FavourablePoorly Favourable4 - High, 3 - Moderately high, 2 - Moderate, 1 - Low
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14. Consumer & FIG Newsletter
Competitive landscape summary
Addressable market Sector tailwinds Competitive Landscape Sector-wise consumer behavior
Brands
5yr Rev
CAGR
3 16% 16% 24% 10% 15% 11% 22% 3% 10% 4% 12% 10% 14% NA 18% NA 14% 7%
5yr price
CAGR
3 13% 8% NA NA 48% 6% NA 12% 14% NA 8% 6% NA NA NA NA NA NA
Core
portfolio
1
Switches,
Lighting,
Fans
W & CSwitchesLightingW & C
Lighting,
Fans,
Pumps
W & C Fans W & CInverters
Stabilizer,
inverters
FansSwitches
Small
Appliances
Switches
Small
Appliances
LightingSwitches
16,910
14,100
10,000
8,000
6,9106,870
5,6305,500
4,480
4,2304,125
2,5502,420
2,085
1,8851,780
1,2301,130
Listed playersPrivate players
FY23 Rev.
(INR cr)
8% 1%1%1%1%2%2%2%2%3%3%3%3%4%7% 5%
Org.
Market
share (%)
1%1%
Notes: 1. Core portfolio denotes the initial product launched before diversification into newer and other categories; 2. Numbers for Syska are as of FY22; 3. Revenue CAGR – FY18-23
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15. Consumer & FIG Newsletter
Product benchmarking: Scaled-up players expanding beyond FMEG segments
Company
Wires &
cables
SwitchgearSwitches Lighting Fans
Home
automation
Air / water
Purifier
Water
heater
Air cooler
Kitchen
appliances
✓ ✓ #2 #2 #3 ✓ ✓ ✓
#1 ✓ ✓ ✓ ✓ ✓ ✓ ✓
#2 #1 ✓ ✓
✓ ✓ ✓ ✓ ✓
✓ ✓ #1 ✓ ✓ ✓ ✓
#3 ✓ ✓ ✓ ✓
✓ ✓ ✓
✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
✓ ✓ ✓ #2 ✓ ✓
✓ ✓ ✓ ✓ ✓
✓ ✓ ✓ ✓ ✓ ✓
✓ ✓ ✓ ✓ ✓ ✓
Foray into B2C categories beyond core product lines by existing scaled-up players (organically & inorganically) as a brand extension
#1 Player#2 Player#3 Player
FMEG Small appliances
Addressable market Sector tailwinds Competitive Landscape Sector-wise consumer behavior
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16. Consumer & FIG Newsletter
Multi-segment approach adopted by industry leaders for expansion
Revenue split by product (FY23)
Wires and Cables Lighting Switchgears Fans
Appliances UPS StabilizersOthers
Havells
41%
12%
16%
25%
7%
Revenue (INR cr): 16,910
Retail Touchpoints: 210,000
Bajaj
Revenue (INR cr): 5,500
20%
20%
50%
10%
Retail Touchpoints: >250,000
Crompton
Revenue (INR cr): 6,870
15%
70%
15%
Retail Touchpoints: >150,000
V-Guard
30%
4%
16%18%
32%
Revenue (INR cr): 4,125
Retail Touchpoints: 210,000
Orient Electric
26%
61%
14%
Revenue (INR cr): 2,550
Retail Touchpoints: >250,000
Polycab
90%
10%
Revenue (INR cr): 14,100
Retail Touchpoints: >150,000
Source: Industry reports, CapitalIQ, Company reports. Notes: 1. Revenue split as on FY23
Large players have built scaled-up platforms backed by multi-segment product offerings across the consumer electricals industry
Addressable market Sector tailwinds Competitive Landscape Sector-wise consumer behavior
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17. Consumer & FIG Newsletter
Transaction landscape

18. Consumer & FIG Newsletter
Consumer Electricals industry continues to attract interest from marquee PE
Target
Acquirer /
Investor Deal rationale Deal value (INR mn)
Dec-21 600
▪Growth capital to expand distribution and enhance branding
initiatives; and also strengthen online presence and capability,
Dec-21 1,530
▪Growth capital to set up a manufacturing facility, expand distribution
and investment in research and development for new products
Jul-18 6,160
▪Strengthen brand presence, expand product offering and develop
presence across markets
Apr-15 19,970
▪Buy-out transaction to build a large scaled-up consumer electricals /
durables platform
Sep-21 44,000
▪Buy-out transaction to build a large scaled-up consumer electricals /
durables platform
Nov-14 1,000
▪Growth capital to fund capital expenditure, expand distribution and
presence and invest in branding and marketing initiatives
Nov-21 1,500
▪Growth capital for funding working capital requirements, and
distribution expansion
Mar-12 1,000
▪Growth capital for funding working capital requirements and
expanding distribution
Jul-08 3,950
▪Growth capital for funding capital expenditures and making
investments in downstream companies
Oct-07 4,380
▪Growth capital to enhance manufacturing capabilities and
deleveraging the balance sheet
Dec-18 1,050
▪Expand presence across markets and funding working capital
requirements
May-23 7,170
▪Growth capital to set up a manufacturing facility, expand distribution
and investment in research and development for new products
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19. Consumer & FIG Newsletter
Notable acquisitions concluded within the Consumer Electricals industry
Target
Acquirer /
Investor Deal rationale Deal value (INR mn)
Mar-23 20,400
▪Acquisition of Butterfly Gandhimathi will help Crompton Greaves
expand into the kitchen and small domestic appliance segment
Dec-22 6,570
▪V-Guard wanted to become a significant player in the domestic
kitchen appliances segment through Sunflame’s Pan India presence
Sep-21 4,230
▪The transaction helps Whirlpool to accelerate profitable growth in
India by entering the
Apr-22 7,200
▪The move helps Asian Paints improve presence in home improvement
and decor categories
Jan-17 9,500
▪Schneider will be able to increase size in India and be the top player
in UPS and inverters; they wanted India to be 1 of their top 4 markets
Jul-10 6,000
▪Preethi mixers was a popular brand in the South and Philips got access
to a large market with dedicated plants and after-sales service
Feb-17 16,000
▪Havells wanted to drive domestic expansion and own a brand &
distribution-oriented asset in consumer durables
Jan-10 1,200
▪The switchgear division was a smaller non-core division in Indo Asian;
Legrand used the acquisition to enter India
Apr-07 17,615
▪The deal allowed Panasonic, which makes building materials and
lighting equipment, make 15% of its overseas sales from India
Jan-11 3,560
▪The acquisition was being done to generate efficiency and was EPS
accretive; Standard operated an electrical products plant in Haridwar
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20. Consumer & FIG Newsletter
Scaled up players replicating global themes and trends with consolidation
Major Player Acquisitions
Large appliances Lighting Switches, fans, etc. Lighting Switches
Duke Arnics Electronics
Electronic meters
Copper rods manufacturing Automation
Kitchen appliances Lighting
Switches Lighting Alarm and detection products
Globus Lamps, Lighting Business
Kitchen appliances Switches Circuit breakers
Guts Electro Mech
Him Furnitech
Kitchen appliances Inverters, stabiliser. Kitchen appliances
Other key transactions
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21. Consumer & FIG Newsletter
Prominent listed players across sub-segments
Consumer electricals
FMEG
Wires & Cables
Kitchen
appliances
White Goods
Listed players considered for valuation comparables
Building materials
Cement
Paints
Pipes
Sanitaryware
Tiles
Furnishing Mattresses
Plywood &
Laminates
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22. Consumer & FIG Newsletter
Listed players performance & market multiples - Segment snapshot
EV / Revenue EV / EBITDA 5-year Revenue CAGR EBITDA Margin
2.5x
2.9x
2.0x
2.1x
4.4x
4.7x
4.5x
3.6x
2.2x
2.4x
2.6x
2.4x
1.7x
1.9x
3.7x
3.5x
5.1x
3.0x
2.7x
1.9x
2.0x
3.3x
NTM details10-year NTM average
Source: S&P Capital IQ; Notes: 1. All multiples are based as on 22
nd
May 2024; 3. 5yr revenue CAGR and EBITDA margins as on 31
st
March 2023
9%
12%
8%
8%
16%
11%
10%
17%
8%
12%
9%
10%
11%
11%
9%
19%
16%
14%
18%
12%
13%
13%
27.1x
27.1x
17.7x
27.2x
20.6x
26.3x
28.1x
20.7x
15.6x
18.4x
21.9x
22.3x
15.9x
16.7x
24.8x
15.7x
30.0x
19.2x
17.2x
13.7x
13.8x
25.9x
Paints
Sanitaryware
Cement
Tiles
Mattresses
Plywood &
Laminates
Pipes
Building materials
Furnishing
Wires & Cables
Kitchen
appliances
White Goods
FMEG
Consumer electricals
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23. Consumer & FIG Newsletter
o3 Capital overview

24. Consumer & FIG Newsletter
o3 Capital — Overview
Recent Transactions
Color denotes o3 Capital’s client
z
PharmEasy
acquired
Medlife
z
BIRA raised
funds from Kirin
Holding &
MUFG
z
Siguler Guff, o3
Alts acquires
stake in Baazar
Kolkata
z
MedPlus
raised funds
from
z
Quest Global
raised funds
from
z
Luker raises
funds from
Siguler Guff
z
TPG Growth
invested in
Ascent Health
z
Blackstone
acquired a
majority stake in
Care Hospitals
Transactions
Closed
208
Transactions Closed
in Last 12 Months
14
Total Value of
Transactions (USD Bn)
10
o3 Capital - Global Presence with Partner Banks
Mumbai
Bangalore
New York Delhi
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Office locations

25. Consumer & FIG Newsletter
Glossary
Term Definition
A/V InfrastructureAudio / Visual infrastructure
B2C Business to Consumer
CAGR Compounded annual growth rate
CY Current year
EPS Earnings per share
Exchange rate USD 1 = INR 82
FMEG Fast moving electrical goods
FY Financial year
HV High voltage
INR Cr Indian Rupee in Crore
INR mn Indian Rupee in millions
LV Low voltage
NA Not applicable
NIP National Infrastructure Pipeline
NTM Next twelve months
PMAY Pradhan Mantri Awas Yojana
USD bn US Dollar in billions
USD mn USD Dollar in millions
W & C Wires and Cables
YoY Year on year
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26. Consumer & FIG Newsletter
o3 Capital — Consumer & FIG Team
Mumbai
603/604, Piramal Tower
Peninsula Corporate Park
G.K. Marg, Lower Parel
Mumbai – 400 013
Bangalore
o3 House, No. 5, Crescent Road
High Grounds
Bangalore - 560 001
www.o3capital.com
Delhi
CoWrks Aerocity,
Indira Gandhi
International Airport,
WorldMark 1, Tower A, Aerocity,
New Delhi – 110 037
Deepesh Garg
[email protected]
[phone]
Shashank Pandey
[email protected]
[phone]
Nuzhat Tai
[email protected]
[phone]
Riddhi Baid
[email protected]
[phone]
Utkarsh Chandra
[email protected]
[phone]
Kajol Jain
[email protected]
[phone]
Devesh Didwania
[email protected]
[phone]
Vaibhav Shah
[email protected]
[phone]
Nisha Punjabi
[email protected]
[phone]
Saurabh Singhi
[email protected]
[phone]
Sharvari Apte
[email protected]
[phone]
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