Kolkata | Mumbai: In a significant move within the private equity landscape, Whirlpool Corporation, the American multinational that has established a firm foothold in the consumer appliance sector, is exploring the sale of a substantial stake in its Indian subsidiary, Whirlpool of India Ltd. According to sources familiar with the development, top-tier private equity firms such as Advent International, Bain Capital, TPG, EQT, Carlyle, and KKR have been approached regarding this potential acquisition. The decision comes as Whirlpool Corp. aims to reduce its stake in the subsidiary by 31%, while intending to retain a 20% ownership interest, thereby solidifying its position as the largest shareholder in the Indian market.

The proposed transaction seeks to generate net cash proceeds in the range of $550-600 million (approximately Rs 4,684-5,110 crore). A formal process for the stake sale was initiated earlier this month, with advisory services being provided by Goldman Sachs, a prominent global investment banking firm. The executives involved in the negotiations indicated that it is conceivable for two funds to collaborate in acquiring the stake, as Whirlpool Corp. has expressed a clear desire to remain the predominant shareholder in its Indian operations. Notably, any entity that acquires a stake of 26% or more would trigger an open offer, a regulatory requirement in India aimed at protecting minority shareholders. However, many prospective buyers are expressing a preference for obtaining a controlling stake.

Currently, discussions are in the early stages, with management meetings beginning to take place as interested funds engage industry advisors to assess the viability of the investment. Among the several private equity funds vying for a stake in Whirlpool of India, many are also evaluating a similar opportunity with Haier India, creating a competitive atmosphere for these lucrative assets. Participants in this pursuit include notable firms like TPG, Warburg Pincus, Goldman Sachs, and GIC, the Singapore sovereign wealth fund, as well as family offices of prominent Indian business leaders, as reported by Economic Times on Monday.

Historically, private equity investments in the consumer appliance sector have yielded positive returns. For instance, Advent International previously took control of CG Consumer alongside Temasek and successfully executed an exit through market channels. Additionally, they continue to hold a controlling interest in Eureka Forbes, which was acquired from the financially distressed SP Group.

However, the market response to Whirlpool's announcement regarding its intention to reduce its stake has not been favorable. Following the news, the stock price of Whirlpool India dropped significantly, reaching a 52-week low of Rs 899 on March 3, down from Rs 1,577 on January 29. As of Monday, the stock closed at Rs 1,199.35 on the Bombay Stock Exchange (BSE), which translates to a market capitalization of Rs 15,216.4 crore. Earlier in February 2024, the parent company had divested a 24.7% stake in its Indian subsidiary through block deals for Rs 4,039 crore, with buyers including SBI Mutual Fund, Aditya Birla Sunlife Mutual Fund, and the foreign institutional investor Societe Generale.

As one of the earliest multinational electronic brands to penetrate the Indian market in the late 1980s, Whirlpool has faced challenges in scaling its operations compared to competitors like LG, Samsung, and Haier, which entered the market more recently. Domestic players such as Voltas and Havells-owned Lloyd have also posed stiff competition. An industry executive noted, Whirlpool Corp. has communicated that it wants the Indian entity to carve its own path without excessive interference, which is a pivotal reason behind their decision to reduce their stake to a minority. This strategic choice opens doors for private equity funds to potentially take control and revitalize the business, which has struggled to match the growth rates of its peers.

Whirlpool Corp.'s Chief Financial and Administrative Officer, James W. Peters, during a recent analyst call, acknowledged that the Indian transaction has sparked considerable interest from various third-party investors. He indicated that the company expects to realize cash from this stake sale in the latter half of 2025, which is anticipated to be directed towards debt repayment or refinancing, a strategy they have previously employed.

Despite numerous inquiries, Whirlpool Corp. has not yet provided comments on the matter. The private equity firms involved, including Carlyle, Advent International, TPG, EQT Group, and KKR, have similarly refrained from making any public statements.

Whirlpool Corp. previously noted that reducing its shareholding would foster increased autonomy for its Indian unit, allowing it to focus more effectively on accelerating growth and leveraging its well-capitalized business to reinvest. In February, Peters articulated that they are not pursuing a strategic buyer for their shares in the Indian subsidiary, citing that such a transaction would not yield as much value compared to the ongoing provision of brand and technology support in the long run. He elaborated that this shift would empower Indian management to make decisions independently, free from the balancing act required to satisfy both U.S. and Indian shareholders.

In its most recent financial report, Whirlpool India recorded sales of Rs 6,332 crore and a net profit of Rs 167 crore for FY24. In the first nine months of the fiscal year ended December 2024, revenue from operations increased by an impressive 17%, totaling Rs 5,530 crore compared to the previous year. In contrast, LG India reported FY24 sales of Rs 21,557 crore and a net profit of Rs 1,511 crore, while Voltas achieved sales of Rs 8,687 crore and a net profit of Rs 604 crore during the same timeframe. During the March quarter, the Asia region accounted for 7.4% of Whirlpool Corp.s global sales, which amounted to $3.6 billion, and contributed 9% to its global earnings before interest and taxes of $214 million.

Aniruddha Joshi from ICICI Securities remarked, With the parent company planning to sell a 31% stake in the Indian subsidiary, there are several potential scenarios that could unfold, which may or may not be favorable for minority shareholders. This evolving situation is likely to attract significant attention from investors, analysts, and industry watchers alike as it unfolds in the coming months.