Exide Industries (EIL) is planning to issue rights in the ratio of one for every four held at a premium of Rs 90 per share. The current issue, which will lead to a cash inflow of Rs 72 crore, will increase EILs equity by Rs 7.2 crore to Rs 36.03 crore. Barun Das, company secretary, EIL, said the issue proceeds will be used to part-finance the Rs 100 crore acquisition of the manufacturing facilities of Standard Batteries automotive division. EIL had earlier planned to fund the acquisition through a mixture of internal accruals and debt.
Exide, which already has a 65 per cent market share in the automotive battery segment, is expected to increase this to 85 per cent after acquiring the Standard Batteries facilities. The acquisition may, however, prove costly to the company as the automobile sector has not shown any major change in its fortunes.
Exide has a technical collaboration with the Japanese major Shin-Kobe Electric Machinery Company, makers of Hitachi Batteries.
In a major expansion exercise, EIL had increased capacities at the three manufacturing facilities located at Haldia and Shamnagar in West Bengal and Chinchwad in Maharashtra, besides the new facility at Hosur to produce VRLA batteries.
After the expansion, its total automotive battery capacity is at 2.8 million units. If the expected demand from the automobile industry does not come about, the company may see inventories piling up.
EIL plans to manufacture automotive batteries at Hosur mainly to cater the southern market and another at Gurgaon, Haryana, to cater to players like Maruti and Daewoo Motors.
The companys performance in the first half has not been encouraging. On a meagre nine per cent increase in sales to Rs 192.66 crore the company showed a discouraging 1.2 per cent rise in net profit to Rs 13.35 crore. This is mainly attributed to the slow down in the OEM automotive battery sales.
Analysts say the increase in capacities through expansion and acquisition will help only if demand from the automobile industry picks up.