Crompton Greaves sells global T&D business to First Reserve

09 Mar 2016

Engineering firm Crompton Greaves on Tuesday said it had sold its international transmission and distribution business to First Reserve International for an enterprise value of €115 million, about Rs851 crore.

''The sale will enable the company to reduce debt and focus on its faster growing Indian businesses," Crompton said in a release to the exchanges. "The company continues to actively examine its other international B2B businesses with a view to monetise these businesses to enhance shareholder value."

The international business had been a sore point with many analysts for Crompton Greaves with total outstanding loans to the international business standing at Rs1,600 crore. The company has a net debt of Rs900 crore.

As a result, Crompton's valuations were seen to have taken a knock. From the current price of Rs146 per share, analysts ascribe Rs110-115 per share as fair value for its consumer durables businesses, leaving Rs40 odd for the power business (at about 10 times FY17 expected EPS of Rs 4.)

Crompton's peers ABB and Seimens trade at around 40-50 times EPS.

Analysts had also ascribed negative value to the international business.

"On a standalone basis, Crompton is a zero-debt company," said market analyst SP Tulsian, terming the development as a positive.

He added that a lot of uncertainty with respect to demerging of the consumer electronics company, along with cloud over the international T&D business, was now gone.

"Crompton shares can now rally another Rs 20 going forward as a result of further value unlocking of the power business," Tulsian told CNBC-TV18.