Calcutta, Sept. 18: The BM Khaitan group is buying out the battery business of BPL Ltd. The deal is valued at Rs 100 crore to Rs 150 crore.
Company officials are tight-lipped about the transaction, which is expected to be formally announced tomorrow. The acquisition is being made through Eveready Industries India (EIIL), the battery maker within the Khaitan group.
Efforts to contact Deepak Khaitan, executive vice-chairman and managing director of Eveready Industries, proved futile.
The Eveready scrip has been buzzing in recent weeks and stockbrokers said they had been anticipating such a deal. The share closed at Rs 133.50 on Friday, an increase of Rs 11 over its previous finish of Rs 122 on BSE.
Sources say BPL Ltd was forced to put the battery business on the block because of its financial crunch. Recently, banks and financial institutions led by ICICI Bank cleared a corporate debt restructuring package of Rs 1,400 crore for the company. BPL suffered a net loss of Rs 268.3 crore during the 18-month period ended March 31, 2005. However, it has reported a net profit of Rs 21.1 crore in the first quarter of this fiscal. This was less than the bottomline of Rs 41.4 crore in January-March 2005.
BPL enjoys a 10 per cent share in the Indian dry cell battery market and a 39 per cent share in alkaline batteries.
Industry sources say the acquisition of BPL’s battery business will ease the competition for Eveready in the market. The Khaitans are the market leader in the battery business in India. In 2004-05, the company sold 1.1 billion batteries. It aims to sell 2 billion batteries in the current fiscal.
Eveready mostly manufactures carbon zinc batteries. It also imports rechargeable batteries and sells them under the Eveready brand in India. It has five factories ' one each in Chennai, Hyderabad, and Noida, and two in Calcutta. It is setting up a factory in Uttaranchal at a cost of Rs 70 crore.
The Khaitans snapped up the battery business of Union Carbide in 1994 for Rs 300 crore and later renamed it Eveready. The value of this 100-year-old brand has been estimated at Rs 660 crore by Ernst & Young.
Following the de-merger of the tea business, the turnover of EIIL stood at Rs 655 crore on March 31. The firm had reported a net profit of Rs 46.3 crore. The tea business of the B.M. Khaitan group has been consolidated under McLeod Russel after the spin-off.
McLeod Russel recently bought Williamson Tea Assam (WTA) from the London-based Philip Magor in a deal valued at Rs 168 crore. The deal turned McLeod into the world’s largest integrated tea company with a total production of 62 million kg. The company is now looking for acquisitions in Kenya.
Recently, Eveready shelved plans for a manufacturing unit in China. Instead, it has decided to source raw materials ' electromagnetic dioxide and plastic ' to lower the cost of producing batteries in India.
The company, which produces 1.2 billion batteries every year, has started exporting batteries to Toshiba of Japan in a small way. In 2004-05, it had shipped 25 million batteries to the Japanese firm, which sells these in Chile, Australia and Sri Lanka under its own brand-name.
Last month, EIIL approved a GDR issue of up to $40 million (Rs 180 crore) and a preferential issue of Rs 64.12 crore to promoters. The GDR listing will take place in November at Luxembourg. The decision will be ratified at an extra-ordinary general meeting on September 20.