Havell's spurts as it gets out of Sylvania

Havell’s India is currently the top gainer on the BSE, up 8.5% at Rs.306.70, its intra day high point. Its 52-week is at Rs.346.15.

The company announced today morning that it has decided to sell 80% stake in Sylvania, which it had acquired in 2007 and had coughed up $300 million. Havells is also selling 80% stake in its wholly owned subsidiary, Havells Exim Limited, Hongkong. The combined equity value for 100% stake for both companies is Euro 186 million (Rs.340 crore). Havells cumulative investment value stands at Rs. 980 crore.

The jump in the profit is not all that substantial but the market is happy that Havells is finally getting out of the loss making Sylvania which has perennially been a drain on its earnings and capex. The company has pumped in Rs 1,000 crore as equity in the holding company that owns Sylvania in the past eight years. Consistent equity infusions diverted money which otherwise could have been used to propel domestic growth or explore better international options.

Sylvania for FY15 had posted a revenue of Rs.3556 crore and net loss of  Rs.79 crore. It is expected that getting out of Sylvania will re-rate the stock and we could see better valuations.