BASF India extends gain after completing sale of construction chemicals biz

Shares of BASF India jumped 8 per cent to Rs 1,280 on the BSE on Thursday. The stock has gained 13 per cent in two days after the company completed the sale of its construction chemicals business to Master Builders Solutions for a consideration of Rs 595.16 crore. The stock of the specialty chemicals company was trading close to its 52-week high level of Rs 1,327, touched on July 3, 2019.

“The Company’s construction chemicals business transferred to Master Builders Solutions India Private with effect from July 1, 2020 after shareholders approval.  The Company has received an overall consideration of Rs 595.16 crore towards the said divestiture,” BASF India said in a exchange filing.

In February, the board of directors had approved divestiture of the construction chemicals business to Master Builders Solutions India Pvt Ltd.

Since May 22, post the January-March quarter (Q4FY20) results, BASF India outperformed the market by gaining 26 per cent, after the company reported a better-than-expected operational performance. In comparison, the S&P BSE Sensex was up 15 per cent during the same period.

In Q4FY20, the company’s Ebitda (earnings before interest, taxes, depreciation and amortization) margins were ahead of estimates at 4.1 per cent, primarily due to lower employee costs and other expenses. This was partially offset by higher-finished goods purchase.

“The high-quality specialty product portfolio with solid brand image offers resilience in the current environment. Agriculture Solutions and Chemicals divisions would be in the limelight in near-to-medium term, given the optimism in the domestic market for agrochemicals and pharmaceuticals,” analysts at Emkay Global Financial Services said in result update.

However, Materials (engineering plastics, MDI /TDI, China spot}) and Surface Tech. (Catalysts, Coatings) would bear the brunt of a structural slowdown in Construction, Petrochemical & Refining and Automotive, it said. The stock trades above the brokerage firm's 12-month target price of Rs 1,185 per share.

At 11:18 am, BASF India was trading 7 per cent higher at Rs 1,265 on the BSE, against 0.81 per cent rise in the S&P BSE Sensex. A combined 246,000 equity shares have changed hands on the counter on the NSE and BSE so far.