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Crompton Greaves up 3%; to sell global automation arm by Sep

Automation systems business has reported revenue of Rs 864 crore in FY16 (against Rs 900 crore in FY15) and the same posted loss of Rs 6.13 crore at EBIT level (earnings before interest & tax).

June 16, 2016 / 11:51 AM IST
 
 
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Crompton Greaves shares gained 3 percent intraday Thursday after a media report suggested that the company is likely to earn Rs 754 crore by selling global automation subsidiary.

"Avantha group firm is selling its global automation business, ZIV, at a valuation of USD 112 million (Rs 754 crore) by September, to focus on its India businesses," a media report said.

Automation systems business has reported revenue of Rs 864 crore in FY16 (against Rs 900 crore in FY15) and the same posted loss of Rs 6.13 crore at EBIT level (earnings before interest & tax).

The company has been selling its non-core assets with an intention to concentrate on India business.

In May, the company had informed exchanges that it was examining possibility of disposing of other international B2B automation businesses on valuations and also appointed investment bankers.

"Strategic actions are intended to meet the company's objective of debt reduction and on focussing on core operations in India," it had said.

At the end of March quarter, Crompton sold its transmission & distribution businesses at Indonesia, Hungary, Ireland, France, North America and Belgium to US-based private equity firm First Reserve at an enterprise value of euro 115 million, which will be completed by October.

It also sold power systems business in Canada to PT Holdings Corporation for Canadian USD 20 million in October 2015. Moreover, it closed down its systems business at Brazil and is in process of winding up same businesses at North America & UK.

In last calendar year, Crompton demerged its consumer electrical business into Crompton Greaves Consumer Electricals and listed on exchanges after selling 35 percent stake in the same for Rs 2,000 crore to private equity firms Advent International and Temasek.

It is also in the process of winding down its engineering projects division and for that it has stopped taking orders.

As a part of its asset optimisation initiatives, the company in October 2015 sold a portion of land parcel situated at Kanjurmarg, Mumbai to Evie Real Estate for an aggregate sum of Rs 496.48 crore. In same month, it announced the sale of CG-Lucy joint venture for Rs 40.2 crore to British company W Lucy & Co.

Meanwhile, Citi on Wednesday upgraded Crompton Greaves to buy with an increased target of Rs 86 per share stating that the company may see a turnaround riding on renewed management focus on business.The brokerage firm also expects rebound in standalone power EBIT margins from historic lows of 5.1 percent in FY16 and likely balance sheet deleveraging from proceeds of sale of international T&D business.

At 10:33 hours IST, the scrip of Crompton Greaves was quoting at Rs 75.65, up Rs 1.20, or 1.61 percent on Bombay Stock Exchange.

first published: Jun 16, 2016 11:50 am

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