Eveready Industries share hits 20% lower circuit; here's why

Shares of Eveready Industries Limited (EIIL) tumbled 20 per cent in intraday trade on Tuesday after India Ratings and Research (Ind-Ra) downgraded battery maker's long-term credit rating with a negative outlook. The stock has fallen nearly 16 per cent in the last six trading session.

Rating agency India Ratings and Research (Ind-Ra) has lowered Eveready's long-term issuer rating to 'IND A+' from 'IND AA-' while placing it on 'Rating Watch Negative (RWN)', citing high net leverage and weakened liquidity amid continuous financial support extended to group companies and delayed asset monetisation.

"The RWN reflects delays in deleveraging which could further impact the company's credit metrics and liquidity," the rating agency said in a report.

Weighed down by the development, shares of the B.M. Khaitan Group's company declined as much 19.99 per cent to hit an intra-day low of Rs 116.85 on the Bombay Stock Exchange against the previous close level of Rs 146.05. The stock was currently trading at its lowest level since October 30, 2014. Data from BSE showed that there was a surge in volume trade with 1.42 lakh shares changed hand over the counter as compared to the two-week average of 0.31 lakh shares.

In a similar trend, Eveready Industries share price plunged 20 per cent in intraday trade to Rs 117.20 on the National Stock Exchange. The scrip opened a tad lower at Rs 145 against the previous closing price of Rs 146.50.

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Ind-Ra in its report said that EIIL's net leverage (net debt/EBITDA) continued to remain high at end-FY19, as it could not reduce its debt to the expected levels due to the continuous financial support extended to group companies and delays in asset monetisation. During FY19 and FY18, EIIL extended around Rs 134 crore and Rs 76 crore, respectively, of inter-corporate deposits (ICD) to its group companies. Adding to it, advances amounting to Rs 75 crore-Rs 80 crore was outstanding, as per the management.

According to the rating agency, the company requires to reduce debt by Rs 130 crore-140 crore in FY20 for the leverage to reduce to an acceptable level, which can only be achieved by the sale of Hyderabad asset or full repayment of ICDs.  

"Any delay in the company's asset monetisation plans and/or further extension of support to group companies would be negative for the ratings," it added.

In a separate development, the company's chairman and non-executive director Brij Mohan Khaitan has resigned, citing his old age. He is 92. "As a mark of respect and in recognition of his significant contributions for over two decades, B. M. Khaitan has been designated as the "Chairman Emeritus" of the company," Eveready Industries said in an exchange filing.

Edited by Chitranjan Kumar

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