If the recent announcements are any indication, ICI India, the diversified Indian subsidiary of Imperial Chemicals Incorporation of UK, seems to have stepped up its decade old restructuring exercise. And that has started to show some positive results in recent quarters.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy) (m)
Earnings per share (Rs)*
The company reported a 7.7% fall in sales in 2QFY02. But full credit to the restructuring exercise, operating profit increased sharply by 51.6% to Rs 190 m. The 7.7% fall in sales is primarily on account of the its exit from non-core businesses. It sold its polyurethanes business (13% of FY01 sales) to Huntsman International India in March 2001. Further, the motor and industrial paints business was transferred to Berger Auto & Industrial Coatings Limited, a 50:50 joint venture with Berger Paints India in the current year. In FY01, it exited from the explosives business. If one were to adjust for these divisions, sales have actually increased by 11% and operating profits by 39% over the corresponding quarter of the previous year.
The restructuring benefit…
(% of sales)
Raw material costs
However, ICI still has a long way to go. It has plans to exit from other businesses like nitrocellulose, rubber chemicals and pharmaceuticals that accounted for 25% of FY01 turnover. But the management had said that it won't sell these businesses in haste but will exit at the right price. While exit from these non-core divisions bodes well in the long run, it has diversified once again into fragrance and starch manufacturing (in line with its parent company's worldwide business operations). It acquired a majority stake in Quest International India, a joint venture between ICI India, Qwest International BV and Hindustan Lever, for a consideration of Rs 1.5 bn in June 2001. Paints division, which contributed to 44% of sales in FY01, is also facing intense competition and ICI has been growing at a comparatively lower rate than the industry.
The scrip currently trades at Rs 70 implying a P/E multiple of 9.8x annualised 1HFY02 earnings. Though the company is expected to fare well at the operating level, not much is expected in terms of sales growth given the nature of businesses like textile auxillaries and chemicals.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407