Kolkata and Mumbai are currently buzzing with news regarding Whirlpool Corporation's strategic plans for its Indian subsidiary, Whirlpool of India Ltd. The US-based parent company is exploring options to sell a substantial 31% stake in its Indian operations, which notably contribute to a staggering 85% of the companys revenue in the Asia-Pacific region. This decision comes as Whirlpool attempts to streamline its holdings, opting to retain a 20% stake while seeking to secure net cash proceeds ranging between $550 million and $600 million, equivalent to approximately Rs 4,684 crore to Rs 5,110 crore.

The formal process for this stake sale was initiated earlier this month with the assistance of its financial advisor, Goldman Sachs. According to insiders familiar with the situation, Whirlpool Corp.s intention is to remain the largest shareholder in its Indian arm, which could lead to a situation where two private equity funds collaborate to acquire the stake. This is particularly significant as any entity that acquires 26% or more would trigger an open offer, which presents additional complexities.

Currently, discussions are in the preliminary phase, with management meetings just commencing. Several private equity funds have already begun the process of bringing industry advisors into the fold. Notably, some of these funds that are competing for stakes in Haier India are also expected to show interest in this lucrative opportunity with Whirlpool. Reportedly, TPG, Warburg Pincus, Goldman Sachs, and the Singaporean sovereign wealth fund GIC are among the competitors, alongside the family offices of prominent Indian business leaders.

In the past, private equity funds have successfully backed several homegrown consumer appliance brands. For instance, Advent International took control of CG Consumer in partnership with Temasek and made a successful exit via public markets. Furthermore, they remain the controlling shareholders of Eureka Forbes, which was acquired from the financially struggling SP Group.

Following the announcement of the decision to reduce its holding to a minority stake, Whirlpool Indias stock experienced a notable decline. It plummeted to a 52-week low of Rs 899 on March 3, down from Rs 1,577 on January 29, before stabilizing at Rs 1,199.35 on Monday, giving the company a market valuation of Rs 15,216.4 crore. Earlier in February 2024, the parent company executed a sale of a 24.7% stake in the Indian unit through block deals, generating Rs 4,039 crore in proceeds. The stakes were acquired by various investors, including SBI Mutual Fund and Aditya Birla Sun Life Mutual Fund, along with a foreign investor, Societe Generale.

Whirlpool has a rich history in India, having been among the first multinational electronic brands to establish a foothold in the country during the late 1980s. However, despite its early entry, the company has struggled to compete effectively against rivals such as LG, Samsung, and Haier, which entered the market later, as well as against local brands like Voltas and Lloyd, owned by Havells.

According to a senior industry executive, Whirlpool Corp. has conveyed its desire for the Indian entity to operate with greater independence, which is a significant factor behind the decision to reduce its stake. This openness could entice private equity funds looking to take control and enhance the business, which has lagged behind competitors in terms of growth and valuation.

James W. Peters, Whirlpools Chief Financial and Administrative Officer, recently shared with analysts that the sale of the Indian business has attracted substantial interest from prominent third-party investors. He also indicated that the company anticipates the cash generated from this transaction to be available in the latter half of 2025, with plans to utilize these funds for debt repayment or refinancing, a strategy they have employed in previous transactions.

While Whirlpool Corp. has not yet responded to media inquiries regarding this matter, representatives from Carlyle, Advent International, TPG, EQT Group, and KKR have all declined to comment on the unfolding situation.

Whirlpool has publicly stated that reducing its shareholding in the Indian subsidiary will lead to greater autonomy for the Indian team, allowing them to concentrate on accelerated growth and leverage their financial resources for further investments. Peters has emphasized that Whirlpool is not seeking a strategic buyer for its shares, asserting that a strategic transaction with another player may not yield as much value compared to allowing Indian management to lead the charge independently. This change is poised to place decision-making firmly in the hands of the Indian management team, free from the oversight that comes with maintaining a balance between US and Indian shareholder interests.

In the last fiscal year, Whirlpool India reported sales of Rs 6,332 crore and a net profit of Rs 167 crore. Moreover, for the nine months ending December 2024, revenue from operations rose by an impressive 17%, reaching Rs 5,530 crore compared to the previous year. In contrast, LG India reported FY24 sales of Rs 21,557 crore with a net profit of Rs 1,511 crore, while Voltas reported sales of Rs 8,687 crore and a net profit of Rs 604 crore during the same period.

In the last quarter, Asia accounted for a mere 7.4% of Whirlpool Corp.s global sales, which totaled $3.6 billion, and 9% of its global earnings before interest and taxes, amounting to $214 million. As the parent company prepares to divest 31% of its stake, various scenarios could unfold, potentially affecting minority shareholders in ways that may not be immediately favorable, according to Aniruddha Joshi of ICICI Securities.