Voltas To Restructure Domestic Projects And Engineering Business; Shares Fall
The domestic projects business contributed to more than 14% of Voltas’ overall revenue in FY20.
Voltas Ltd. will transfer its domestic projects business into a wholly owned subsidiary through a slump sale, three months after the consumer durables maker approved the restructuring in principle.
The company will transfer its mechanical electrical and plumbing; heating, ventilation and air-conditioning; and water project, mining and construction equipment business and textile machinery division to Universal MEP Projects & Engineering Services Ltd., according to an exchange filing.
The transfer is expected to be completed on or before March 31, 2021 and consummated by the end of September or other such date as may be mutually agreed between the parties. The cash consideration for the deal would range in Rs 1,000-1,200 crore.
The domestic projects business, the filing said, contributed 14.06% to the company’s overall revenue in the fiscal ended March 2020.
Voltas, in the filing said, aims to focus on business-to-consumer and business-to-business segments independent of each other and to expand their respective growth. “Further, segregation of the businesses in separate entities will lead to more direct and meaningful comparison with industry peers.” The move, it said, also gives Voltas flexibility to expand further into the business-to-consumer space.
The company's trying to focus on both business-to-business and B2C businesses, that's a step in the right direction, said Manoj Gori of Equirus Securities. “They have mentioned that they will be transferring the businesses into the subsidiary. So we await more clarity on what will be the future plans with regards to demerging this business,” Gori told BloombergQuint over the phone.
The air-conditioner maker also reported third-quarter results earlier in the day. Its revenue and net profit rose 34% and 46%, respectively, over the year earlier in the three months ended December. Operating profit jumped 50%, beating consensus estimates.
The company’s unitary cooling products business grew 40% year-on-year.
The electro-mechanical projects and engineering products business saw growth of 26% and 46%, respectively, from the prior year.
Shares of Voltas fell as much as 3.9% to Rs 1,060.2 apiece, before paring losses.