ICICI Venture-backed Electrotherm To Spin Off Or Sell Iron Pipes Div

22 March, 2016

Ahmedabad-based Electrotherm India is looking to hive off or sell its ductile iron pipes (DIP) division – comprising manufacturing, marketing, sales and distribution of ductile iron pipes, along with the production unit located at Kutch, Gujarat, according to a company statement to the Bombay Stock Exchange on Tuesday.

“The company will consider approving an ordinary resolution for sale, lease, transfer or disposal of its DIP division to its subsidiary, group and/or associate company or to any other entity as a whole and as a going concern on a slump sale basis,” the statement said.

The net proceeds from the sale will be utilised for debt repayment and may also be invested to expanding the operations of other existing businesses, the company added.

After the announcement, Electrotherm scrip crashed 8.3 per cent to close at Rs 127.7 a share on the BSE in a weak Mumbai market. At this price, the company has a market cap of just Rs 147 crore.

ICICI Venture holds 11.9 per cent in the firm as of June 30, 2011. The PE firm had invested Rs 82 crore in Electrotherm in March 2007, but the value of its holding has shrunk to just Rs 17.5 crore.

The investors’ negative reaction to the sale announcement is arguably due to the impact upon revenues and profitability due to the restructuring. The company drew almost a fifth of its consolidated revenues from the ductile iron pipes business for the year ended March 2011.

The gross sales and profit before interest and tax (PBIT) of the DIP division for FY 2010-11 was Rs 420.83 crore and Rs 28.05 crore, respectively. While revenues rose almost 42 per cent over the previous year, margins in the business were hit. For the corresponding period in FY 2009-10, gross sales and PBIT of the DIP division was Rs 295.41 crore and Rs 51.02 crore, respectively.

The company, however, had consolidated net profit of just around Rs 8.9 crore as the high cost of servicing the outstanding debt shaved off net margins.

According to recent media reports, Saint-Gobain S.A. of France, a global leader in construction, building materials and glass, is in talks to acquire the pipes division of Electrotherm for an estimated Rs 300 crore-Rs 350 crore.

Electrotherm India also manufactures electric scooters under the brand name of YO Bykes and further focuses on engineering projects and renewable energy equipment business.

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ICICI Venture-backed Electrotherm To Spin Off Or Sell Iron Pipes Div

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