Crompton Greaves stock trips on stake dilution by promoters

The Crompton Greaves’ scrip closing 6.11 per cent down on the BSE at ₹191.95 on Thursday, is seen as a fallout of the promoter selling 8.3 per cent of its stake in the company.

The promoter company, Avantha Holdings, sold 5.2 crore shares of Crompton Greaves at ₹192.61 for about ₹1,000 crore. Avantha’s holding in Crompton Greaves has reduced to 32.54 per cent from 40.84 per cent.

The promoter stake sale apparently mirrors negative signs and an expression of lack of confidence in the company, marketmen said.

Meanwhile, Avantha Holdings in a statement said: “… this is a one-time transaction by the holding company to reduce debt.”

Arun Kejriwal, Founder, Kris Research, said, “It is surprising how quickly the management changes its view of what it wants to do to raise funds. Sometime back, it wanted to hive off a division of its business to raise funds. Suddenly, it has decided to sell its shares directly as the market has gone up.”

A Motilal Oswal report said increased investments in Avantha Power had led to Crompton Greaves pledging 61.4 per cent of its shares as of September. The continued need for fund infusion had remained as an important area of discomfort.

Hence, successful exit from the power generation business and stake sale in consumer business would address the liquidity apprehensions of the group and resolve the issue of pledged shares.

In the second quarter of FY15, Crompton sold eight acres at Kanjurmarg factory in Mumbai for about ₹300 crore. The report said the total factory land is about 34 acres, of which, 22-24 acres appeared surplus and open for monetisation.

On the consumer business de-merger plan, Motilal Oswal researchers felt Crompton would retain 25 per cent stake and listing was expected by November 2015. Crompton Greaves had stated that Avantha Holdings was likely to sell a part of its shareholding in the consumer business.

Early this week, Avantha Holdings, Crompton Greaves and Ballarpur Industries promoted company, Avantha Power and Infrastructure, signed a deal to sell 100 per cent stake in Korba West Power to Adani Power. The deal was valued at ₹4,200 crore.

There are also reports that discussions are on for sale of Jhabua Power (a subsidiary of Avantha Power & Infra) with a Tata Power–ICICI Ventures consortium. If this materialises, it would ensure the exit of the Avantha Group from the power generation business, the report added.