Pantaloon: Acquiring a new look - 20th April, 2009

20th April, 2009

Rallis India: Well positioned
Robust performance continued at Rallis India, the agrochemicals company belonging to the Tata stable. The company reported net profit of Rs 72 crore for the year ended March 2009. But this appears to be lower on a y-o-y basis, despite strong operating growth, due to the onetime gain of Rs 87 crore in the earlier year following a land sale. For the year ended March 2009, the company reported 23% growth in net sales to Rs 856 crore and a substantial improvement in operating profit margins, leading to a 67% jump in the operating profits. Thanks to a muted growth in interest and depreciation costs, the pre-tax profits were 83% higher against the previous year. Rallis India’s strong operating performance was enabled by a jump in its international business, which now contributes nearly one-third of its revenues. The company secured long-term contracts from key customers with revenue potential of Rs 1000 crore over the next five years. In the domestic market, it was able to combat the spurt in costs through a series of price hikes totalling nearly 15% in FY09. Nearly 29% of the company’s revenues came from innovative products launched in the past four years.
For the quarter ended March 2009, the company reported 25% higher net profit at Rs 10 crore on 26% growth in net sales at Rs 187 crore. It was also able to improve its operating margins in the fourth quarter, which is typically its slowest quarter in a fiscal. The company declared a dividend of Rs 16 per share for FY 2009, which translates into a dividend yield of 3.3% on Wednesday’s closing price of Rs 492. It had paid the same dividend last year as well, albeit due to the extraordinary gains.

Pantaloon: Acquiring a new look
Early last week, Pantaloon Retail India announced plans to restructure its businesses. The company would sell/transfer its retail and fashion divisions to wholly-owned subsidiaries. The holding company will have two subsidiaries. One subsidiary will house the value and lifestyle retail formats, while the other will look after designing, manufacturing and sourcing products. The announcement was in line with market expectations. The stock lost 5% on a weekly basis after gaining nearly 60% in the past one month. Pantaloon also announced plans to raise money through the sale of shares or convertible warrants for funding its expansion and diversification plans. The additional equity infusion would help to lower its high debt equity ratio of 1.55. As on June 2008, the company’s interest coverage ratio was a low 1.9x as compared to Shopper Stop’s 5x. Its operating margin was just enough to cover two years of interest payment against 5 years for the latter. Pantaloon would issue 11 million equity shares at a price of Rs 183/- each to the promoters and their associates; 4.1 million equity shares at a price of Rs 183/- per share to Dharmyug Investments; and 5 million warrants at a price of Rs 183/- each to the promoters and associates, with an option to the warrant holders to acquire same number of equity shares within 18 months. There would be 11% equity dilution, leading to a 17% decline in the earning per share (EPS) from Rs 7.7 to Rs 6.4. It will hold an extraordinary general meeting on May 12 to obtain the approval of shareholders for the preferential issue of equity shares and warrants to promoters and investors.

(Contributed by Ramkrishna Kashelkar and Supriya Verma Mishra)