Whirlpool has no plans to exit the Indian market but its recent stake sale in the India unit was due to high valuations and disparity against the global parent, CEO Marc Bitzer has said.
However, the statement didn’t seem to have done much as Whirlpool India shares fell 6 per cent to sink to a 52-week low of Rs 1,186 on February 27. The stock of the consumer durables company has crashed 9 per cent this yea, against a 0.9 per cent rise in the benchmark Sensex.
Last week, Whirlpool Corp through its wholly-owned subsidiary, Whirlpool Mauritius, sold a 24 per cent stake in the India arm, reducing it holding to 51 per cent. SBI Mutual Fund emerged as the largest buyer, picking up a 7.2 per cent stake, reports said.
“We’ve taken down our stake to 51 per cent. We’re positive on India long term but when our share is trading at 50 times multiple & we expect it to be much lower, then it’s an asset arbitrage,” Bitzer told CNBC.
The transaction, executed by Whirlpool Mauritius, a wholly-owned subsidiary of Whirlpool Corporation, involved the sale of 30.4 million equity shares of Whirlpool India in an on-market trade. The deal generated approximately $468 million in gross sales proceeds, aimed at reducing Whirlpool Corporation’s debt.
Following the sale, Whirlpool Mauritius’ holding in Whirlpool of India decreased from the previous 75 percent to the current 51 percent, as reported in a US SEC filing by Whirlpool Corporation. The company emphasised the subsidiary’s execution of the equity shares sale on February 20, 2024.
Plans Ahead
Whirlpool Corporation clarified that the funds raised from the transaction are earmarked for debt reduction. The move aligns with the company’s strategic financial planning.
Whirlpool Corporation had previously disclosed its intention to sell up to 24 percent stake in Whirlpool of India on November 30 of the preceding year.
The regulatory filing, also shared on BSE by Whirlpool of India, aimed to raise funds and alleviate debt. In the fiscal year 2022-23, Whirlpool of India reported a total revenue of Rs 6,210.25 crore.
Jefferies Downgrade
Shares of Whirlpool of India hit over six-year low of Rs 1,186.85, as they slipped 6 per cent on the BSE in Tuesday’s intra-day trade after Jefferies downgraded the household appliance maker to ‘underperform’ from ‘hold’, cutting the target price to Rs 1,125 from Rs 1,265. The stock hit its lowest level since September 2017.
The firm’s operating profit margin (OPM) has declined to 5 per cent in the nine months ended FY24 against 9-12 per cent in FY15-21, the brokerage said. It also cut its FY25/26E OPM estimates by 60-70 bps to 6.2 per cent/6.7 per cent, driving 8-10 per cent EPS cuts.
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