InvestorQ : How do you see the impact of GHCL hiving off its home textiles business to Indo Count Industries?
Dhwani Mehta made post

How do you see the impact of GHCL hiving off its home textiles business to Indo Count Industries?

Dilmini Mercia answered.
11 months ago

In a deal that would be value accretive for both the companies, GHCL (formerly Gujarat Heavy Chemicals Ltd) divested its Home Textile business to Indo Count Industries. ICIL is one of the leading Indian manufacturers and exporters of home textiles. The sale of the division is worth Rs.609 crore. Post this deal, Indo Count Industries will emerge as the largest global home textile bedding manufacturer. For GHCL it is about realigning its resources.

Apart from exiting a non-core business, GHCL also has about Rs.608 crore of cash that it can reinvest in its core business projects. GHCL will use the funds to fund some of its greenfield project, expansion of core product portfolio, investments in green energy projects, strategic tie-ups and organic growth. ICIL will be in a position to better leverage the textile franchise it has built over the years while GHCL will be able to free up resources for its core business.

To sum it up, the benefits to GHCL are quite apparent. Apart from streamlining its operations, GHCL also gets the added cash for deployment. However, the real benefits over the longer term will accrue to Indo Count Industries. For Indo Count it will amount to business expansion and portfolio enrichment. Here is how Indo Count gains from the deal.

· Indo Count becomes the world's largest Home Textile bedding manufacturer with annual capacity of 153 million meters. Top line accretion would be Rs.1,500 crore.

· Improved capacity utilization would mean better economies of scale and lower costs. Indo Count can offer more flexible options to customers in home textiles.

Post the deal, both the stocks of GHCL and Indo Count have rallied sharply. This is indication that the market is positively disposed to the synergies arising from the deal. GHCL brings back its focus to its core heavy chemicals. For Indo Count it enhances and enriches the customer offering.