The Hindu Business Line : Voltas witnesses renewed buying interest

Voltas has been witnessing some amount of renewed interest on market talk of the company looking at consolidation in the AC business through takeovers/acquisitions.

The Voltas stock closed at Rs 760, up 1.75 per cent with around 60,000 shares traded on the BSE against the two-week average of about 41,500 shares.

Given the limited number of players in this segment, there is speculation in the market as to which of these could be the potential target. ETA General and Fedders Lloyd are being touted as the `possibles' by the market. Videocon's domestic AC business is also a possible target, according to market sources. The company is even now said to be scouting for a partner in the cold chain business and is rumoured to be looking at a US-based player.

When contacted, a company official said Voltas is looking at the inorganic route for growth but had no specific plans at the moment.

Realty play

Brokers maintain that apart from the corporate buzz, there is also some amount of realty play at this counter. The company has about 60 acres of land in Hyderabad, valued at around Rs 130 crore. However, analysts said while the land sale made sense for either expansion purposes or to meet working capital need, the market discounted it, hence the high valuation to the company on the FY07 estimated earnings.

Despite the company's vision to achieve Rs 10,000 crore by 2010-11 and a PBT of 10 per cent (currently 6.3 per cent), analysts believe the stock to be quoting at a premium.

"The counter is likely to be range bound until the second quarter i.e. September 2006. The performance is not going to be significantly high compared to the third and fourth quarter, given seasonal demand and execution of major electromechanical projects towards the latter part of the year. Hence if it dips below Rs 700, it would be a good investment buy," an analyst said.

Voltas, synonymous with air-conditioning and refrigeration, is doing well on account of a strong order book position of Rs 1,900 crore vis-à-vis its electromechanical division, while its engineering products division is also contributing to the bottom line.

Promoter holding in the company is around 28 per cent with Tata Sons holding 23.79 per cent stake, while Tata Investment Corporation Ltd has a 3.11 per cent share.

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