Paradise Papers: Electrical appliances major Havells set up offshore firms to push expansion

Havells India is promoted by Qimat Rai Gupta (photo) and his family, which purchased the Havells brand in 1971.

ELECTRICAL APPLIANCES company Havells India floated over 50 subsidiaries beginning February 2000, most of them in tax havens, to acquire a global footprint through acquisitions and tie-ups, Appleby records show. Havells India is promoted by Qimat Rai Gupta (photo) and his family, which purchased the Havells brand in 1971. The brand was named after its first owner Haveli Ram Gupta.

In the 10 years leading up to 2015-16, revenues of Havells India Ltd (HIL) grew almost eight times from Rs 1,681 crore in 2006-07 to Rs 7,714 crore. On February 9, 2007, HIL set up an entity in Isle of Man called Havell’s Holdings Ltd — an investment firm that served as its vehicle for its overseas expansion. Havells India funded Havell’s Holdings which, in turn, invested EUR 141.25 million in Havells Malta that facilitated its global spread — 52 subsidiaries across Europe, Latin America and Asia.

Havell’s Holdings, whose share capital is GBP 116.95 million, is fully owned by Havells India Ltd. The Indian company’s board has, in the past, had high-profile retired bureaucrats including Adarsh Kishore, former finance secretary, and S K Tuteja, former MSME secretary.

Havells India is listed in India, with the public holding 37.44 per cent shares and the promoters retaining the balance 62.56 per cent shares. The promoters comprise three groups: QRG Enterprises Ltd (30.4 per cent); Ajanta Mercantile Ltd (11.01 per cent) and the Gupta Family (21.15 per cent). QRG stands for Qimat Rai Gupta, the group’s patriarch.

The subsidiaries also borrowed individually from international and Indian financial institutions. For instance, Havell’s Holdings Ltd had a facility agreement of EUR 40 million from DBS Bank, New Delhi. Havells Netherlands Holdings, a subsidiary of Havells Malta Ltd, borrowed EUR 12 million as per a facility agreement dated March 14, 2013 from Standard Chartered. Havells Sylvania Europe Ltd too borrowed Eur 77.5 million from ICICI Bank, Standard Chartered, Frankfurt Branch and HSBC Bank plc as per a facility agreement of May 24, 2012.

Havells acquired SLI Sylvania’s lighting business in 2007 for $300 million using debt and internal accruals but in December 2015 sold 80 per cent of its Malta subsidiary, which was the holding company for all overseas operations, to Inesa UK Ltd, a firm owned by Chinese company Shanghai Feilo Acoustics Co Ltd for EUR 138.4 million.

Four indirect subsidiaries were not to be involved in the sale consideration. These were: Thai Lighting Asset Company Ltd (and its subsidiary Havells Sylvania Thailand Ltd), Havells Sylvania Brazil Illuminacao Ltda, Havells USA Inc and Havells Sylvania Illuminacion Chile Ltda.

Response from Havells India:

Havells India Limited acquired the global Lighting business of Sylvania which was present across Europe, Latin America and Asia in April 2007. The investment was committed with a view of business expansion with global presence. To facilitate such acquisition and its financing, we established the Holding companies as is the norm for such overseas ventures. The 50-odd subsidiaries were already part of the Sylvania Holding structure due to business presence in 40-odd countries and thus part of the acquisition. The key purpose for establishing Havells Holdings limited was financing and holding of Sylvania assets. The holding structure of Sylvania was duly filed with the Reserve Bank of India as per extant regulations.

The tax has been duly paid in the respective jurisdiction as may be applicable. The business of Sylvania, its performance over the period is all in public domain. The business was successfully managed for over 7 years but because of the disruption in the lighting industry with the invasion of LED and the low growth phase across Europe and Latam (Latin America), it was decided to release the resources and management bandwidth from such geographies and focus on domestic market. The stake sale in Havells Malta to INESA was to facilitate the smooth transfer of the Sylvania entities to the purchaser. The entire transaction at Havells Sylvania is to facilitate bonafide business transactions in accordance with local regulations and practices.