Crompton Greaves gained momentum after the acquisition of Butterfly Gandhimati. should you buy

Crompton has signed definitive agreements to acquire up to 55% stake in Butterfly Gandhimati. It will also acquire certain BUTTERFLY trademarks in affiliated and cognate classes from the promoter group entities.

“The acquisition will help Crompton to have stronger connectivity in South India, expand distribution network, offer better right-to-win in kitchen appliances and reduce dependence on the Crompton brand. Earnings from the Butterfly acquisition will increase, assuming a 5% synergy gain by FY24. We are confident that there will be synergy in raw material sourcing, distribution, media sourcing and distribution,” domestic brokerage house ICICI Securities said in a note.

With the stock price improving 26% over the past six months, the brokerage maintains its ‘Buy’ rating on the shares of Crompton Greaves with a target price of Rs. 504.

“We believe that the Crompton brand has a relatively strong association with male consumers given their product profile of water heaters, lighting, fans etc., while kitchen appliances brands like Butterfly have stronger engagement with female consumers. Butterfly’s With the acquisition, Crompton will have a better write-to-win in kitchen appliances.”

Crompton had announced that the transaction would be subject to the completion of customary closing conditions and is expected to be financed through a mix of internal sources and debt.

In addition, Crompton was largely dependent on the single brand ‘Crompton’. With the acquisition of Butterfly, ICICI Securities believes that the company will have access to two strong brands which will make the business mode relatively smoother.

The views and recommendations given above are those of individual analysts or broking companies and not of Mint.