Kolkata | Mumbai: In a significant move within the consumer appliance sector, Whirlpool Corp., the American multinational manufacturer, is reportedly exploring options to divest a 31% stake in its Indian subsidiary, Whirlpool of India Ltd. This decision comes as the parent company aims to reduce its holding in the listed entity while still retaining a 20% stake. Sources familiar with the matter indicate that this strategic shift is intended to raise net cash proceeds between $550 million and $600 million (approximately Rs 4,684 crore to Rs 5,110 crore).

The formal process for this stake sale was initiated earlier this month, with Goldman Sachs acting as the financial advisor for the transaction. Notably, Whirlpool of India generates around 85% of its revenue from the Asia region, making this divestment a crucial aspect of the company's broader financial strategies and market positioning.

Executives involved in the discussions have revealed that the deal could potentially see two private equity funds collaborate to acquire the stake. This arrangement aligns with Whirlpool Corp.'s intention to remain the largest shareholder in its Indian operations. However, it is important to note that the acquisition of 26% or more of the stake would trigger an open offeran aspect that has piqued the interest of several private equity firms. Many of these firms are keen on obtaining a controlling stake, which could lead to dynamic changes in the operational management of Whirlpool of India.

Currently, talks are at an initial stage, with management meetings underway. Several private equity funds that have been competing for a stake in Haier India are also considering the Whirlpool opportunity. TPG, Warburg Pincus, Goldman Sachs, and Singapores GIC, among others, are reportedly in the mix, alongside family offices associated with prominent Indian industrialists.

Historically, private equity funds have shown interest in backing domestic consumer appliance brands. Advent International, for instance, previously took control of CG Consumer in collaboration with Temasek, successfully exiting through market avenues. Furthermore, they continue to maintain their position as controlling shareholders of Eureka Forbes, a company acquired from the financially troubled SP Group.

The announcement by Whirlpool Corp. to reduce its holding prompted a notable decline in Whirlpool Indias stock prices. After the announcement on January 30, the stock hit a 52-week low of Rs 899 on March 3, plummeting from Rs 1,577 on January 29. The stock closed at Rs 1,199.35 on Monday, resulting in a market capitalization of approximately Rs 15,216.4 crore.

In February 2024, the parent company had already offloaded a 24.7% stake in the Indian unit through block deals, raising around Rs 4,039 crore. Notable buyers included SBI Mutual Fund, Aditya Birla Sunlife Mutual Fund, and the French investment bank, Societe Generale.

Whirlpool entered the Indian market in the late 1980s, being one of the first multinational electronic brands to do so. However, over the years, it has struggled to keep pace with competitors such as LG, Samsung, and Haier, who have gained significant market share since they entered the Indian market at a later stage. Even domestic brands like Voltas and Lloyd, which is owned by Havells, have outperformed Whirlpool.

A senior industry executive noted that Whirlpool Corp. has expressed a desire for its Indian entity to forge its own path with greater autonomy, hence the decision to reduce its stake to a minority shareholding. This strategic move could potentially create an attractive opportunity for private equity firms eager to take control and revitalize a business that has not kept pace with its competitors.

During a recent analysts call, Whirlpools Chief Financial and Administrative Officer, James W Peters, highlighted that this impending transaction has already garnered considerable interest from various large third-party investors. He indicated that the company anticipates cash inflow from this transaction in the latter half of 2025, aiming to utilize the proceeds for debt repayment or refinancing, similar to previous strategies.

While Whirlpool Corp. did not respond to specific queries about the ongoing processes, representatives from Carlyle, Advent International, TPG, EQT Group, and KKR opted to refrain from making comments. The parent company's earlier statements indicated that a reduced shareholding would enhance the operational autonomy of its Indian unit, allowing it to pursue accelerated growth and invest further in its well-funded business.

Peters reiterated in February that the company is not in search of a strategic buyer for its shares in the Indian subsidiary. He explained that strategic transactions with other players would not be as beneficial as maintaining long-term control over the brand and technology. This approach is expected to empower Indian management, enabling them to make decisions without the constraints typically imposed by balancing the interests of both US and Indian shareholders.

In recent financial reports, Whirlpool India recorded sales of Rs 6,332 crore and a net profit of Rs 167 crore for FY24. Furthermore, in the nine months leading up to December 2024, the company experienced a 17% increase in revenue from operations, totaling Rs 5,530 crore compared to the previous year. For context, 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 period.

In the March quarter, Asia contributed to 7.4% of Whirlpool Corp.s global sales, which amounted to $3.6 billion, and 9% of its global EBIT of $214 million. As the parent company prepares for the sale of its 31% stake, analysts are observing multiple scenarios that may unfold, which could have varying implications for minority shareholders. Aniruddha Joshi from ICICI Securities remarked on the potential outcomes, emphasizing the uncertainty surrounding the future of minority holders in this evolving corporate landscape.