The Hindu Business Line : Eveready gains on demerger plans

THE stock price of Eveready Industries has increased almost 14 per cent after the announcement of the company's plans to demerge its FMCG and bulk tea business. Brokers and analysts said the move by the company is good, as it would unlock the value of its FMCG business, which is profitable.

In addition, the rise in tea prices in the last few months is also likely to benefit the company, they said.

After the announcement of demerger plans, the stock increased from Rs 29 to today's closing price of Rs 33 on the BSE.

Earlier this week, Eveready Industries informed stock exchanges that it proposes to reorganise its business under two separate legal entities — one devoted to FMCG business and the other to the bulk tea segment, by retaining the FMCG business in the existing company and demerging the bulk tea business to a new entity.

The board of the company meets on June 28 to decide on this issue.

According to analysts, the stock was not able to get the valuation of a FMCG company. "The company's batteries, torch business is a profitable business while the bulk tea business is loss making. Due to this, the market was not able to give the right valuation," said an analyst with a domestic broking firm.

For the financial year ended March 2003, the company's FMCG business had sales of around Rs 645 crore and profit before interest and tax of Rs 65 crore and the tea business reported a loss of Rs 6 crore on sale of Rs 297 crore.

For 2002-03, the company reported a net profit of Rs 11 crore. In the first nine months of 2003-04 also, the company has reported a net profit of Rs 38.78 crore on sales of Rs 692 crore. However, for the quarter ended December 2003, it reported a loss of Rs 10.25 crore on sales of Rs 253 crore.

He said that with tea price also moving up, the company should get better valuation after the de-merger.

A broker with a domestic broking firm said, "Within the FMCG companies, Eveready has the lowest market capitalisation to sales ratio." The market cap to sale ratio for Eveready at the moment is 0.2. Normally for FMCG companies market cap to sales ratio is around one.

More Stories on : Stock Markets | Electrical Goods

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Pioneer Embroideries' share capital up

Templeton MF to consolidate product portfolio

Initial gains not held

Eveready gains on demerger plans

Mid-cap IT stocks back in favour

Harig Crankshaft zooms 500% in 13 trading sessions

ACC: Outlook negative, sell June futures

Oil & power sectors take a beating