Emami Group promoters have sold 10% of their stake in FMCG company Emami to raise nearly Rs 1,230 crore to pare debt. The promoters will look for strategic sale of some of its assets to bring down the debt further.
The stake sale is intended to be used primarily for further reducing debt at the promoter level.
Mohan Goenka, director, Emami, told DNA Money that the promoters will not sell any more stake in Emami and the realisation from the current stake sale would bring down the total debt at the promoters’ level of Rs 2,200 crore from Rs 3,300 crore.
“Most of the remaining debt is of long-term nature. We would like to bring down the promoters’ debt to a negligible level in 6-8 months by strategically selling some of our assets,” Goenka said. The process of identification for the divestment of such assets has been initiated.
The buyers who purchased the promoters’ shares in the open market on Monday are mostly domestic mutual funds.
Post stake sale, total promoter stake in Emami stands at 52.74%. In the last quarter, too, Emami promoters sold a 10% stake for about Rs 1,600 crore in Emami, which brought down the promoter holding in the company from 72.74% in the December quarter to 62.74% in the March quarter. Some of the buyers were SBI Mutual Fund, IDFC, L&T Mutual Fund and PremjiInvest.
Around 47.68% of promoters’ shareholding is pledged as on March 2019, which will be nearly 38% post repayment of the debt, Goenka said.
According to a filing by Emami on BSE, the promoters’ shares are pledged with Axis Trustee Services Ltd, Tata Capital Financial Services, Hero Fincorp, IndusInd Bank, Kotak Mahindra Prime, DCB Bank among others.
Emami shares fell almost 14.95% intra-day to touch a record low of Rs 246 on the report of promoters’ selling stake in block deals, before closing at Rs 267.30 apiece, lower 7.59% than its previous close. From a peak of Rs 598.95 on August 1, 2018, the stock has fallen 55% so far.
Emami reported a 6% drop in its consolidated net profit during the quarter ended March 31, 2019, at Rs 56.09 crore from Rs 59.73 crore a year ago.
Anand Rathi Share and Stock Brokers in a post-earnings report said that the domestic business was hit by the extended winter, which curtailed growth in summer products (more than 40% of revenue in Q4 of FY19) and a general demand slowdown seen in the quarter.
“The management is optimistic about growth reviving in H2 of FY20 on better rural sales,” the report said.