Shares of HSIL surged 16 per cent on Monday after the company said that its board approved the transfer of its manufacturing business on a contract basis for a consideration of ₹630 crore.
The stock, after hitting a high of ₹271 on the BSE, closed 14.93 per cent higher at ₹268.20. Trading volumes also zoomed to 3.07 lakh shares as against two-week average of 20,000 shares. Of the traded shares, 52.25 per cent or 1.60 lakh shares were presented for delivery. On the NSE, HSIL ended 14.84 per cent higher at ₹267.35
In a disclosure to the stock exchanges, HSIL said its board on Saturday approved the transfer of its business of manufacturing of sanitaryware, faucets and plastic pipes and fittings (BPD Undertaking) to Brilloca, on a slump sale basis for a lump sum consideration of ₹630 crore, subject to customary closing date adjustments.
Backward integration
Brilloca Ltd is a wholly owned subsidiary of Somany Home Innovation Ltd. As a result, Brilloca Ltd, which is currently engaged in the marketing and distribution of building products (sanitaryware, faucets, plastic pipes, and fittings), will be backward integrated and have better control over the entire value chain, from manufacturing to after-sales.
The cash proceeds will be used towards pre-payment of existing bank borrowings to further strengthen HSIL's balance sheet and create capital to further expand its packaging business, said a release.
EY was appointed independent valuation advisor for the transaction and AZB was the legal advisor.
For financial year ending 2021, HSIL reported a net profit of ₹88.06 crore on revenues of ₹1,852.59 crore. For Q2 ending September 2021, it postd a PAT of ₹30.41 crore and income of ₹546.21 crore.
Shares of Somany Innovation, after rising to ₹416, closed the day at ₹400.95, a gain of about one per cent over the previous day's close.