Bajaj Electricals Ltd would demerge its power transmission and distribution (T&D) business into a separate company in a move to create a sector-focused firm and streamline the management structure. Meanwhile, the company reported a 51% decline in its consolidated net profit to ₹48 crore for the third quarter.
The board of Shekhar Bajaj-led company on Tuesday approved the scheme of arrangement between Bajaj Electricals (the demerged company) and Bajel Projects Ltd (the resulting company) subject to the approval of shareholders.
“With steady losses and high investments in working capital, Bajaj Electricals’ EPC business was EVA negative, in our view. While we do not ascribe any value to EPC business, we believe the divestment will be long-term value accretive for Consumer products segment as well as Bajaj Electricals," said brokerage house ICICI Securities.
The brokerage believes that the divestment will allow the company to increase its investment in brand-building activities, R&D and distribution expansion. It has maintained it Add rating on Bajaj Electricals shares with target price of ₹1,300.
The company's total revenue from operations was down 12% to ₹1,319 crore during the quarter under review as against ₹1,500 crore in the year ago quarter. Gross and EBITDA margins also contracted due to higher input prices, freight inflation and a change in revenue mix.
While Bajaj Electrical' Q3FY22 performance was affected by rural slowdown, higher input prices, change in revenue mix and higher base, ICICI Securities remains positive given the company’s market share gains in fans and kitchen aids.
Analysts at Prabhudas Lilladher remain structurally positive on longer term prospects for the company given strong brand with leadership position in kitchen appliances, increasing shelf space, improving balance sheet and demerger of EPC business. They have maintained Accumulate stance on the stock with price target of ₹1,303.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
