Eveready awaits new owner as investors batter stock

The Khaitans are racing against time to bring in a new owner for Eveready Industries, the flagship entity of the B M Khaitan Group even as shares of the battery maker as well as McLeod Russel, country's largest tea plantation company are being hammered due to rising concern over the liquidity crunch in the group.

"The negotiations for Eveready are on currently and a deal is likely to get finalised shortly," a top management official of the group said.

The rating firms are already seized of the concerns over continuing high debt level, delays in monetisation of assets like real estate properties of Eveready or some tea estates of McLeod Russel and financial support to group entities which are failing to turn around.

India Ratings last week downgraded Eveready from AA- to A+ with negative outlook due to continued high net leverage and weakened liquidity.

Following this, investor started dumping the scrip which has dropped sharply from Rs 146 on Friday to Rs 110 on Thursday.

Shares of McLeod Russel have also not been spared, which fell from Rs 75 on Friday to Rs 51 on Thursday.

McLeod Russel had suffered a similar rating downgrade a month back with Icra putting it under negative outlook.

The sale of a majority stake by the Khaitans, who own 44.35% stake in Eveready at a controlling premium, along with the sale of some real estate assets would help soothe the nerves of the bankers who are already faced with several prominent highly leveraged business houses.

Any further delay in deleveraging could further impact Eveready's liquidity, the rating firm has warned, adding that high level of pledge of promoters' stake at both the companies might pose an additional risk.

In Eveready, close to half of promoters stake, or about 49%, was pledged with financial institutions as of March-end while around 42% of promoters' holdings in McLeod Russel are pledged as on date.

Eveready needs to reduce debt by Rs 140 crore in this fiscal for the leverage to reduce to an acceptable level, which can only be achieved by the sale of Hyderabad asset or full repayment of inter-corporate deposits (ICDs). Any further delay in deleveraging could further impact the company's liquidity, Icra has warned.

During fiscals 2019 and 2018, Eveready extended around Rs 134 crore and Rs 76 crore, respectively, of ICDs to its group companies and advances amounting to Rs 75-80 crore were outstanding.

Poor profitability coupled with exposure to group entities have kept Mcleod, the country's largest tea plantation, under stress though it has been selling off its prized gardens occasionally to raise money.

Meanwhile, the group is seeing passing of the baton from B M Khaitan, 92, to his younger son, Aditya Khaitan. The group patriarch has retired from the chairmanship of most of the group entities like Eveready Industries and Mcleod Russel because of his advancing age.

Kolkata-based B M Khaitan created history by buying out crisis-ridden Indian businesses of Union Carbide in the 90s, giving him a dominant position in dry-cell battery business which continues till today.

He also created the country's largest tea plantation entity through acquisitions of British companies like Williamson Magor in the 60s, McLeod Russel in the 80s and then went on to buy out several of Hindustan Unilever's gardens in 2005.

Efforts to keep the group afloat are being spearheaded by Aditya Khaitan, who had traditionally been managing McLeod Russel but since the death of his elder brother Deepak Khaitan in 2015 was forced to start guiding engineering outfit McNally Bharat and also Eveready, which is now managed by Deepak's son Amritangshu.

DEPLETING SHARPLY

• India Ratings last week downgraded Eveready from AA- to A+ with negative outlook due to continued high net leverage and weakened liquidity
   
• Following this, investors started dumping the scrip which has dropped sharply from Rs 146 on Friday to Rs 110 on Thursday