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  • South Asia

Deal focus: Peepul’s power grab pays off with CNPS exit

  • Holden Mann
  • 28 June 2019
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Peepul Capital has secured an exit from Indian power supply maker CNPS, selling the business to Japan's Fuji Electric seven years after acquiring a majority stake

For Peepul Capital, the sale of Consul Neowatt Power Solutions (CNPS) to Japan’s Fuji Electric is not only a successful exit, but a textbook example of the value that a private equity investor can bring to a portfolio company. What makes it even more important is the fact that it involved a controlling stake, a type of deal still relatively uncommon in India and almost unheard of at the time of investment.

“India has grown quite rapidly in the private capital space, but back in 2012 there weren’t too many opportunities to invest $30 million and get total control in a company,” says Sandeep Reddy, co-founder of Peepul. “Getting that chance to add value was an important factor, in addition to the macro drivers of the Indian economy.” 

Established in 1981, Consul Consolidated – the predecessor of CNPS – had emerged as a major supplier of power management solutions, including uninterruptible power supplies (UPS) and voltage stabilizers, by the time it approached Peepul. The company was looking for financial and strategic support to fuel its growth plans and considered the PE firm a natural ally.

Peepul saw Consul as the right company at the right time. Not only was Consul an established manufacturer with an industry-leading knowledge base, but India’s strong economic growth meant that businesses would need to find ways to secure their power supply in the face of outages and fluctuations. Peepul could also help upgrade the company’s talents through M&A.

“We saw an opportunity to quickly expand this stable of products and we felt that while the company had a strong foundation, we would have to move up the technology chain to add value to our investment,” says Arjun Ananth, portfolio director at Peepul. “So very early on, we started scouting for value-add acquisitions.”

There were several bolt-ons to bolster Consul’s strengths, most notably Pune-based energy management systems developer Neowatt Energy, which merged with Consul two years after the acquisition. Neowatt provided Consul with a strong research and development capability to complement its well-established manufacturing and servicing business lines.

Since the merger, CNPS has become India’s largest UPS manufacturer. This ensured that it would be a prime candidate for a takeover by the Japanese giant, which has paid what AVCJ understands to be around $100 million for the company. CNPS’ loyal customers in healthcare, industrial, and social infrastructure are expected to give Fuji a stable base of operations as it works to transfer its expertise in Japan’s data center space to India.

“While the overall market was growing in the single digits, we were growing at more than 30%, most of which was taking market share away from established multinational corporations,” Ananth says. “And we were doing that not through aggressive pricing – because we were very particular about profitability – but through selling a very strong value proposition.”   

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