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The exits by private equity investors as well as the senior management of Crompton Greaves (Crompton) raise concerns related to continuation of its business strategy which may result in lower valuation multiples, we believe.
Promeet Ghosh, new MD & CEO, has articulated his strategy as (1) driving sustainability, (2) innovation and digitisation and (3) investments in branding. While he is associated with the company since 2016, we have concerns regarding
his expertise in running a durables company (he has mostly been an investment banker so far). We will be keenly watching his strategy and execution. Shantanu Khosla (elevated to Exec VC) will continue with the same role (different
designation) and support the management till Dec’25.

While there are concerns related to the change in directorate, we believe the stock offers healthy risk: reward to investors at current valuation (22x FY25E). With Shantanu Khosla remaining on board till Dec’25, there is some stability to the
management. The business moats (brands, distribution network) also remain largely intact. We cut FY24E earnings to factor in muted demand for durables. We maintain BUY rating on the stock with a revised DCF-based TP of Rs325 (28x
implied FY25E; earlier TP: Rs495).

* Change in directorate: Mr. Mathew Job, CEO, has decided to leave Crompton for better opportunities and Mr. Promeet Ghosh has been appointed as the new MD and CEO with effect from 1st May’23 till 30th Apr’28. Mr. Shantanu Khosla has been
promoted as the Executive Vice-Chairman of the company from 1st May’23 to 30th Apr’24. Thereafter, he shall assume the position as Non-Executive Vice-Chairman till 31st Dec’25.

* About Mr. Promeet Ghosh: Mr. Ghosh is on the company’s Board since 2016. He has earlier worked as an investment banker for two decades and has also worked with Temasek. He has also served as director on the Boards of several companies in
his rich experience of thirty years. However, it will be important to watch out his strategies and execution to run a white goods and durable company.

* Likely reduction in valuation multiples: We believe the exits by private equity firms as well as senior management may have impact on Crompton’s business strategy, at- least in the short term. It may also result in the reduction of valuation multiples for       the company, in our view.

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