Cummins Gets A Lift From Spin-Off

The share price of Cummins India surged for the second consecutive day today following the company's decision to hive off one of its plants.

The stock of the multinational affiliate rose almost 6 per cent to Rs 56.95 on the Bombay Stock Exchange amid a trading volume of 6.78 lakh shares. This is the highest daily trading volume witnessed by Cummins India since November 2001.

The stock had leaped 5.9 per cent on Monday to Rs 53.75 boosted by the company's decision to hive of the plant. At the current price of Rs 56.95, Cummins India is up 28 per cent from its 52-week low of Rs 44.05 on October 17, 2001, and it is down 37.5 per cent from its 52-week high of Rs 90.60 on February 13, 2001.

The Cummins board on Monday proposed the hiving off of its plant II located at Nagar Road, Pune, subject to approval of the shareholders.

The plant houses foundry sheds, a pattern shop and office buildings on a built-up area of approximately 59,000 square feet. The total gross value of assets as on September 30, 2001, at plant II comprising land, roads, buildings, plant and other assets is approximately Rs 7.90 crore and the net value after depreciation works out to around Rs 3.30 crore.

The plant was established as an undertaking in 1983 with the primary objective of meeting the in-house requirement of various cast iron and aluminium castings and also to undertake manufacture of patterns for the company.

An important consideration for establishing the plant at that juncture was the limited availability of good quality patterns and castings from vendors.