Whirlpool In A Vortex, Mulls Equity Issue
Whirlpool of India Ltd board is planning an equity issue and a hike in authorised capital to recapitalise the company after suffering losses worth more than Rs 218.8 crore in the last two years.
The companys board is meeting in New Delhi today to discuss the issue. It has also informed the stock exchanges through a separate notice of the board meeting.
The US multinational has been faring badly in India with sales of its products, washing machines and refrigerators hit by the downturn in the consumer electronics industry. It was forced to shut its refrigerator plant in Punjab last year as products piled up at the dealers end.
The nature of the equity issue is not known, but it has become necessary as losses are threatening to erode the companys entire net worth. At the end of December 31, 1996, Whirlpool of India had accumulated losses of Rs 161.13 crore.
For 15 months ending December 31, 1996, Whirlpool posted a loss of Rs 64.30 crore. It had a net worth of Rs 393.73 crore. For 1997, the trend has continued in the first half with losses of Rs 57.75 crore.
Whirlpool has responded to the situation by trying to push up sales through dealer discounts and attractive finance schemes. Strategically, it has sold non-core divisions like the compressor division and merged several group companies with itself. The latest is the case of Whirlpool Financial India Pvt Ltd, which it decided to merge late last year.
Before that, the company merged Whirlpool Washing Machines, Expo Machinery Ltd.
The move comes when several consumer electronics multinationals are faring badly in India after entering with high hopes and ambitions. Electrolux AB of Sweden has also not been able to make much headway, despite having a strong brand like Kelvinator. Godrej-GE, the 60:40 joint venture between Godrej & Boyce and GE of US also fared badly in last financial year with losses totalling upto Rs 60 crore.
The main reason is the slow growth of the white goods market. Growth in the basic 165 litre segment has slowed, while the upper end of the market comprising the 350 litres and above is showing faster growth. Competition from South Korean players like Daewoo, Samsung and LG Electronics has also cut margins and reduced realisations.