| Deepak Khaitan in Calcutta on Friday. Picture by Kishor Roy Chowdhury
Calcutta, May 9: Eveready Industries India Limited (EIIL) has put its plan to split the battery and tea businesses on hold and has instead chalked out a five-pronged growth strategy, according to Deepak Khaitan, executive vice-chairman and managing director.
Khaitan today said the decision was based on valuations arrived at by Rabobank, the merchant banker appointed by the company to work out the split proposals.
“Rabobank had submitted a preliminary report on our demerger plan. The initial valuation carried out by the bank is much lower than what we expected. At the moment we have kept the report aside and we are not pursuing the plan to demerge our tea and battery businesses. The present business environment does not demand such a bifurcation,” he said.
The Khaitans had restructured their tea and battery businesses in 2000. As a part of the restructuring plan, Bishnauth Tea Company was merged with McLeod Russell. Then the entire tea business of the Khaitans was merged with the battery business of EIIL.
Subsequently the Khaitans passed an enabling resolution to demerge the battery and tea businesses of Eveready and asked Rabobank to chalk out the demerger process.
The company today announced its results for the year ended March 31, 2003. It has registered a net profit of Rs 11.13 crore against a loss of Rs 53.33 crore in the previous year. Sales stood at Rs 942.53 crore compared with Rs 883.50 crore in the previous year.
The battery business has helped the company turn around. The sales volume of batteries stood at 957.27 million as against 822.53 million last year — a growth of 17.7 per cent.
The interest outgo of the company for 2002-03 was Rs 60.18 crore as against Rs 111.59 crore in the previous year. Eveready’s debt burden has come down to Rs 788 crore compared with Rs 872 crore in the previous year. The company will have to repay Rs 92 crore to the banks and financial institutions in the current year according to the debt restructuring package.
Eveready has charted out a five-pronged growth strategy for this fiscal. The strategy includes increasing the market share of its battery business from 42 per cent to 45 per cent; increasing the penetration of battery in the rural markets; expanding the flashlight business; doubling the packet tea business; and increasing the bought-leaf capacity.
The company has also decided to raise its battery manufacturing capacity at the Noida plant. It is also consolidating its battery producing facilities in Chennai.
Talking about the packet tea business, Khaitan said last year the company sold 3,000 tonnes of tea through packets. “This year, we plan to sell 6,000 tonnes of packet tea,” he said. The company’s brands are Premium Gold, Tez and Jaago. The packet tea business contributed Rs 30 crore to the company’s turnover.
The company has also put on the back burner plans to sell its tea gardens. “Our gardens in Dooars, have reached breakeven and we have shelved our plans to sell them. We will increase our tea capacity by buying leaves from outside. That will be more cost competitive for us,” Khaitan added.
The company will step up its tea leaf buying capacity from 18 lakh last year to 50 lakh in the current fiscal.