Varroc zooms 20% on divestment plan of 4W lighting biz in US and Europe

The company believes that the divestment is part of company's strategy to align its resources with the high value and high growth primary markets in China, India, and two-wheeler sector globally.

Shares of Varroc Engineering froze 20 per cent upper circuit at Rs 494.60 and hit 52-week high on the BSE. The spike comes after the company signed a Securities Purchase Agreement (SPA) with Compagnie Plastic Omnium SE of France for divestment of 4-wheeler lighting business of the company in US and Europe.

The stock of auto components and equipments maker surpassed its previous high of Rs 458.30 that it had touched on January 14, 2022. Till 09:24 AM; a combined 570,000 equity shares changed hands with 1.32 million shares as pending buy orders on the NSE and BSE.

"The divestment is a part of the company’s strategy to align its resources with the high value and high growth primary markets in China, India, and the two-wheeler sector globally," said the company.

The Euro 600 million transaction will see Varroc divesting its lighting system operations in the USA, Brazil, Mexico, Poland, Czech Republic, Germany, Turkey, and Morocco.

Varroc will also continue to operate its China JV and other international 2-wheeler businesses in countries like Italy and Vietnam and global electronic businesses in Poland and Romania. Meanwhile, the company is retaining its 4-wheeler lighting operations in Asia.

"The planned divestment of Varroc’s 4-wheeler lighting systems businesses in the US and Europe will ensure enhanced shareholders’ value, sustainable growth, and further development of its R&D facilities and engineering capabilities," the company added.

In a bid to transform itself into a high-tech company and focus on the existing growth of electronics, connectivity, electrical vehicles (EVs) product lines and the 2-wheeler segment globally, the company will divest its 4-wheeler lighting systems operations in the US and Europe.

"With the Indian automobile sector, including 2-wheelers, 3-wheelers, and passenger car segment, poised to grow at 10-12 per cent CAGR over the next 4-5 years, and with emerging alternative technologies in EV mobility, Varroc will be investing in operations and R&D to enhance its shareholders’ value by creating a robust and financially strong operation, ensuring higher return on investments," the company said.