Dr Beck & Co

Dr Becks electrical insulation division, which accounts for 90 per cent of its sales, suffered due to negative growth recorded in end-user sectors like motors, transformers and capacitors. Its net profit plunged 51 per cent to Rs 1.96 crore in 1996-97. Another blow was dealt when the parent company took a decision to move out of the electrical insulation business worldwide. It decided to sell its 51 per cent stake in the company which depressed sentiment further.

The bad performance continued and its September 1997 half-year results saw its net profit decline by 56 per cent to Rs 0.62 crore. The share price, which had recovered to Rs 60 in August 1997, slumped to Rs 33 in November 1997.

 

While selling its stake in the company, BASF AG decided to retain the automotive coatings business in its fold which was sold to BASF Industries Pvt Ltd for Rs 14 crore. With an equity capital of Rs 7 crore only, the possibility of a hefty dividend payout buoyed the share price to the current level of Rs 67.

The substantial cash inflow which lead to possibility of hefty payout must have aided the rally of the scrip from the bottom of Rs 33 in November to the current level of Rs 67. Its shareholders were not disappointed as it declared a hefty dividend of Rs 13.85 per share.

BASF AGs stake in Dr Beck was sold to the US-based Schenectady International, which is a global leader in the electrical insulation business. Since Dr Becks core business now matches that of its parent, its performance will improve.

The short-term outlook for downstream electrical industry continues to be dull and an export cushion is essential to tide over the current situation. The global presence of its new parent can give a boost to the company.