Voltas Denies Home Appliances Business Sale By Tata Rumour;; To Take Rs 500 Crore Loan; Stock Gains

Mumbai-based Voltas has clarified reports claiming that Tata Group is planning to sell its home appliances business. Voltas denied the rumours which lifted its stock price on Wednesday as it rallied by over 1% on BSE. Also, the company announced its plan to take a loan of Rs 500 crore from a bank rather than issuing NCDs.

At the time of writing, Voltas shares traded at Rs 820.60 apiece, up by 0.84% on BSE with a market cap of Rs 27,152.40 crore. The stock has gained by at least 1.4% with an intraday high of Rs 824.80 apiece in early deals.

Voltas clarified the news 'Tata Considering Sale of Voltas Home Appliance Business' which appeared on Bloomberg. The news was also picked by by few other publications/channels.

In its regulatory filing, Voltas said, "In this connection, we wish to categorically state that the aforesaid news is totally incorrect and blatantly false, with no factual basis whatsoever. The Management therefore denies any such development."

Voltas pointed out that the company is a market leader in Room Air Conditioners and its Joint Venture with Arcelik for Voltas. Beko Products is one of the fastest-growing brands in the Appliances business. The organization continues to outperform the market and exceed revenue targets in all its product categories.

"Voltas re-affirms its commitment to the Home Appliances business, and the Company will further strengthen its market-leading position in the categories that it represents," the company added.

Lastly, Voltas added, "As the aforesaid news has caused embarrassment, apart from concerns including by the shareholders/investors, we are separately taking up the matter with Bloomberg to issue a necessary clarification."

The Bloomberg on November 7th reported citing people familiar with the matter, that Tata Group's management is deliberating the possibility of the sale of Voltas home appliances business and hasn't decided whether to include its local joint venture with Arcelik AS in a deal. Also, it said that the considerations are at an early stage and Tata Group may decide to keep the asset for longer.

Apart from this, Voltas has announced its plan to raise Rs 500 crore by availing of an unsecured Rupee Term Loan from a Bank instead of issuing non-convertible debentures. Voltas said, "The Rupee Term Loan would be utilised for capital expenditure of the Company for its new manufacturing plant at Chennai and Waghodia in Gujarat."

Earlier, Voltas planned to raise Rs 500 crore through NCDs issue. However, this proposal was withdrawn in a meeting held on November 8th.

During Q2FY24, Arun Agarwal, VP of Fundamental Research, Kotak Securities pointed out that Voltas' results were impacted by EBIT losses in the Electro-Mechanical Projects and Services (EMP) segment. EMP segment EBIT loss was on account of provisions taken due to delayed collections in overseas projects. However, the EMP segment's order book continues to grow and was higher by 58% yoy. In the Unitary Cooling Products (UCP) segment, the company reported 15% yoy revenue growth. UCP segment EBIT margins were higher yoy.

In Q2FY24, Voltas posted a consolidated total income of Rs 2,364 crore, which was higher by 29% YoY. Net profit was at Rs36 crore as compared to a loss of Rs 6 crore in the corresponding quarter last year.

Post Q2 results, Prabhudas Lilladher in its note said, "Management expects good volume growth in the
upcoming festive season and expects downtrend of inflation, stagnant interest rates and fulfilling monsoon season to help revive rural demand. Voltas Beko saw volume growth of 40% YoY, outperforming the industry. We estimate FY24-26E Revenue/EBITDA/PAT CAGR of 14.9%/25.1%/35.6% with RAC volume CAGR of 12.0% and EBITDA margin of 7.8% in FY26E. Maintain 'HOLD' at SOTP-based TP of Rs909."