HSIL buys faucets unit from Havells India

HSIL Ltd, formerly Hindustan Sanitaryware & Industries, which has a 40% share in the sanitaryware products market, has acquired the faucet business of Havells India. HSIL had entered the faucets business in 2008-09, as part of its effort to be seen as a complete wellness solutions provider. So it diversified into bathroom solutions and kitchen solutions, providing designs, financing, delivery and installation of the products.

After acquiring Havells’ Rajasthan-based unit, which makes chrome-plated brass bath fittings and accessories, HSIL said it will become the second largest player in the faucet business in the next one year. Jaquar claims to be the biggest player in this market. HSIL’s joint managing director, Sandip Somany, had said in an interview in their 2008-09 annual report that growing through acquisitions in the building products division was part of its growth plan.

Financial details of the acquisition have not been disclosed except that it is an all cash deal. With most of the players privately held, little information is publicly available about the faucet market. One estimate puts the market size at Rs 1,300 crore, based on a report prepared by IMRB for the Royal Thai Embassy’s Business Information Centre, and hosted on its website here. Jaquar has a turnover of Rs 450 crore, according to this report, and the market is expected to grow by about 7-8%.

Havells also has not disclosed in its annual reports separate details of the faucets business. But apart from its electrical businesses, its turnover includes ‘others’ a segment which earned Rs 48 crore of revenues in 2008-09. But this could include other products too, apart from faucets. These products are being sold under the Crabtree brand (note: link may become dormant after the sale is completed). The sale of this division by Havells makes sense as it can focus on its core business of electrical fixtures. HSIL will get the design and manufacturing capabilities and the faucets business can grow along with its existing divisions.

HSIL makes container glass and building products which contributed almost equally to revenues in 2008-09. In the quarter ended December 2009, overall sales rose by 40% to Rs 207 crore while net profit was up by 43% to about Rs 10 crore.

Update: HSIL has put up a press release on its website that gives some more information. It says that this acquisition will enable it to become the second largest faucet company in India, in 12 months time. While the IMRB study quoted a figure of Rs 1300 crore, HSIL says the total market size is Rs 3,000 crore, of which 45% or Rs 1350 crore is in the organised market. HSIL has said it will get modern facuet making facilities, additional distribution network and inorganic growth, as a result of this acquisition. See HSIL release here.

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