Elgi Equipments gains after restructuring China operations

Elgi Equipments rose 2.52% to Rs 134.05 at 14:25 IST on BSE after the company said that it has restructured its China operations and has also acquired entire share capital of Ergo Design.

The company made the announcement during market hours today, 15 December 2015.

Meanwhile, the S&P BSE Sensex was up 97.03 points or 0.41% at 25,252.32.

On BSE, so far 9,935 shares were traded in the counter as against average daily volume of 65,536 shares in the past two weeks.

The stock hit a high of Rs 138 and a low of Rs 130 so far during the day. The stock had hit a record high of Rs 174.80 on 4 March 2015. The stock had hit a 52-week low of Rs 118.65 on 11 September 2015.

The stock had underperformed the market over the past one month till 14 December 2015, declining 2.32% compared with 1.8% fall in the Sensex. The scrip had, however, outperformed the market in past one quarter, gaining 5.96% as against Sensex's 2.73% decline.

The mid-cap company has equity capital of Rs 15.85 crore. Face value per share is Re 1.

Elgi Equipments said that due the economic slowdown in China, the company's business operations have been severely affected and to minimise losses and approach the market in a focussed manner by supplying products that meet local market requirements there is a need for some restructuring to be carried out. It was hence decided to restructure the business and operations of Elgi Equipments Zhenjiang and also to wind down Elgi Compressors Shanghai Trading. These activities will be completed in the next few weeks.

Elgi Equipments has also decided to acquire entire share capital of Coimbatore based, independent industrial design studio, Ergo Design, from its existing shareholders at par value of Rs 1 lakh. Ergo Design had a total turnover of Rs 61.79 lakh during 2014-15 and is marginally profitable. The company had availed services to the tune of Rs 43.76 lakh from Ergo Design in 2014-15. The purchase is likely to be completed in the next couple of weeks. The acquisition was made in order that the company has better control over the intellectual property rights created by Ergo Design with input from the company and save costs.

On consolidated basis, Elgi Equipments' net profit dropped 60.6% to Rs 5.42 crore on 1.5% growth in net sales to Rs 323.27 crore in Q2 September 2015 over Q2 September 2014.

Elgi Equipments manufactures air compressors and automobile service station equipment.

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