Why Whirlpool of India Share Price is Falling

It's a common observation that stocks experience increased volatility when a promoter sells a significant stake in their company.

This can be attributed to shifts in market sentiment, concerns about the company's future direction, changes in ownership structure, and potential implications for corporate governance.

These factors can lead to heightened trading activity and fluctuations in the stock's price.

One such company that has witnessed notable volatility in recent sessions is mid-cap stock Whirlpool of India, following the sale of a substantial stake by its promoter.

However, that's not the only reason dragging the stock down.

Continue reading to find out why Whirlpool of India share price has fallen over 20% in the past 6 months and why it's a strong contender to make a comeback this year.

#1 Foreign Promoter Offloads Stake

In early trade on 20 February 2024, Whirlpool of India share price declined 5% after its promotor sold stake via a block deal.

Whirlpool of India's promoter, Whirlpool Mauritius Ltd, sold 24% stake worth US$451 million (Rs 27.5 billion) as per a term sheet.

The block deal was done at a floor price of Rs 1,230 per share, which is around 8% discount from yesterday's closing price of Rs 1,331.

As per deal details, around 19 million shares in the Indian unit will be sold along with a provision to offer an additional 11.4 million shares, for a total of $451 million ($282 million plus $169 million).

This stake sale is aimed at helping the American multinational company pare its debt and deleverage its balance sheet.

As of December 2023, Whirlpool Mauritius held a 75% stake in the Indian company. The company last year mentioned that it intends to take some money off the table by selling stake in the company while also maintaining majority control.

Following this transaction, the promoter now holds 51% stake in Whirlpool of India.

#2 Anticipation of Sales Drop

For the past few months, Whirlpool has seen soft demand across segments and it's anticipating a sales drop this year.

In the first quarter ended September 2023, the consumer durables company reported a 22.1% decline in consolidated net profit at Rs 382 million. If we compare this sequentially, net profit declined almost 50%.

The parent company and global major Whirlpool Corp, while posting good sales numbers last month and a small market-share gain, said it expects sales to grow at a marginal rate as demand weakness continues.

According to experts, consumer spending is impacted due to unseasonal rainfall across regions and the continuation of inflationary pressure.

Combine this with high competition and bingo! Rivals Blue Star and Havells have posted relatively better numbers compared to Whirlpool.

However, Whirlpool of India recently posted Q3 numbers, which has given a slimmer of hope for investors betting on the stock's underperformance to end.

What Next?

The company said that first half was impacted by price adjustments and regulatory cost but the improvement in margins in recent quarter came on the back of cost productivity and festival seasonality.

Whirlpool of India said its refrigerator and washer segments registered high double-digit growth.

All these developments come as a breather as Whirlpool of India shares have underperformed in the last 3 years. The stock is down almost 50% over the last 3 years as intense competition and shrinking margins took toll on its profitability.

However, the company is a strong contender to come back and regain its mojo as it has already started capturing market share with its new launches and portfolio premiumisation.

The company is also deploying more manpower, aggressively expanding its reach.

It recently acquired majority stake in Elica India business, taking its stake up to 87% from 49%.

Whirlpool of India is very much capable of making a comeback given its established position in the refrigerator and washing machine segments, which together account for a majority of the company's revenues.

As its ratings report points out, the company has maintained its market share, backed by its strong brand, established distribution network, new product launches, investment in R&D and potential demand in Tier 2 and Tier 3 cities.

Given these strengths, there is a strong chance that a turnaround is not far away and so is a place for this stock on your watchlist.

Here's a table showing Whirlpool's financial performance over the years.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	53,977	59,925	58,999	61,966	66,677
Growth (%)	12%	11%	-2%	5%	8%
Operating Profit	7,469	8,021	6,086	4,790	4,977
OPM (%)	14%	13%	10%	8%	7%
Net Profit	4,097	4,902	3,518	5,664	2,190
Net Margin (%)	8%	8%	6%	9%	3%
ROE (%)	21.2	21.3	13.2	18.6	6.6
ROCE (%)	32.4	29.2	17.9	21.4	9.1
Dividend (Rs)	5.0	5.0	5.0	5.0	5.0
Debt to Equity (x)	0.0	0.0	0.0	0.0	0.0

Data Source: Ace Equity

How Whirlpool of India Share Price has Performed Recently

In the past five days, Whirlpool of India share price is down 4%.

Today, the stock fell 5% in intraday trade after its promoter offloaded stake.

Whirlpool of India has a 52-week high of Rs 1,733 touched on 12 October 2023 and a 52-week low of Rs 1,256 touched on 23 February 2023.

In the past 1 year, Whirlpool shares have delivered a lacklustre performance.

Here's a table comparing Whirlpool with its listed peers -

Comparative Analysis

Company	Whirlpool	Bajaj Electricals	Crompton Greaves	IFB Industries	Hindware Homeware
ROE (%)	6.6	11.9	19.7	2.3	12.1
ROCE (%)	9.1	19.1	18.9	7.4	18.4
Latest EPS (Rs)	15.9	13.4	6.8	7.1	6.4
TTM PE (x)	83.5	77.2	42.9	193.9	67
TTM Price to book (x)	4.7	8.6	6.6	7.8	5.2
Dividend yield (%)	0.4	0.4	1.1	0	0.1
Industry PE	57.9
Industry PB	5.3

Data Source: Ace Equity

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...