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This stock reduced Rs 1 lakh into Rs 18,000 in two years; here's why

An investment of Rs 1 lakh in the micro cap stock on January 12, 2018 would have shrunk to Rs 18,467 today, translating into wealth erosion of 81% during the period

Aseem Thapliyal | July 3, 2020 | Updated 17:11 IST
This stock turned Rs 1 lakh into Rs 18,000 in over two years
Eveready Industries share price has gained 22.3% in the last year and risen 55% since the beginning of this year

Eveready Industries stock has led to considerable wealth destruction for investors in over two years. The microcap share, which stood at Rs 455.40 on January 12, 2018, closed at Rs 84.10 on BSE today.

An investment of Rs 1 lakh in Eveready Industries on January 12, 2018  would have shrunk to Rs 18,467 today, translating into wealth erosion of 81% during the period. Market cap of the firm stood at Rs 621 crore on BSE today.

However, Eveready Industries share price has gained 22.3% in the last year and risen 55% since the beginning of this year. In a month, the share has climbed 22.65%. Eveready Industries share price hit a 52-week low of Rs 34.40 on October 17, 2019  and 52-week high of Rs 94.80 on July 2, 2020.

In Q4 of last fiscal, net profit rose multi fold to Rs 63.73 crore against Rs 4.04 crore in Q4 FY19.

"The profitability was aided by rise in gross margin in the core segments of batteries and flashlights and improvement in operating margin due to additional cost savings measures. The discontinuance of the packaged tea business further helped the company in improving margins and releasing working capital,"  Eveready Industries said.

That took the stock of firm to its 52-week high at Rs 94.8 on July 2, 2020.

Eveready Industries share price hits 52-week high on strong Q4 earnings

Financial performance

The firm has a debt of about Rs 400 crore on its books. The financials of the battery maker have not been encouraging in the last two years.

Sales fell to Rs 1,221 crore for the fiscal ended March 2020 against Rs 1,456 crore sales for the fiscal ended March 2018. 

For March 2019 fiscal, the firm logged sales of Rs 1,506 crore.

Interest on loans rose to Rs 70 crore for quarter ended March 2020 against Rs 29.30 crore interest for March 2018 quarter. That led to erosion in profit. In March 2019 fiscal, interest component stood at Rs 54.77 crore. However, the firm logged a profit of Rs 179.48 crore, thanks to an exceptional item of Rs 151.59 crore in March 2020 fiscal.

The exceptional item arose from profit on the sale of land for Hyderabad (Rs 62.03 crore) and Chennai (Rs 89.55 crore), a move aimed at reducing leverage to an acceptable level. For March 2018 fiscal, profit stood at Rs 53.16 crore. It slid to Rs 48.70 crore in the next fiscal.

In April 2019, India Ratings and Research (Ind-Ra) downgraded battery maker's long-term credit rating with a negative outlook. Eveready Industries 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.

Eveready Industries stock hits upper circuit on nod for operation of plant

During FY19 and FY18, Eveready Industries extended around Rs 134 crore and Rs 76 crore, respectively, of inter-corporate deposits (ICDs) to its group companies, the credit ratings agency said. Impacted by the downgrade, shares of the BM Khaitan Group's company declined as much 19.99 per cent to hit an intra-day low of Rs 116.85 on BSE against the previous close of Rs 146.05 on April 30,2019.

However, in the financial statements for  fiscal ended March 2020, the firm said repayment of these deposits and the guarantees/post-dated cheques given to/on behalf of these companies along with future interest have been guaranteed by certain promoter and directors of the company, in the event of a  default by the said companies to pay the dues.

The company had inter-corporate deposits amounting to Rs 421.16 crore (including interest) outstanding as at March 31, 2020.

The company is engaged in the business of marketing of dry cell batteries, rechargeable batteries, flashlights, general lighting products, small  home appliances and confectioneries which come under a single business segment known as consumer goods.

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