One time gain to de-leverage balance sheet...
Havell's Netherlands BV and Flowil International Lighting (Holding) BV
(Havells Sylvania), wholly owned subsidiaries of Havells India, have
entered into a settlement agreement with Osram Sylvania Inc and Osram
AG. According to the agreement, both parties will be entitled to
manufacture and brand products in each other's territories, provided the
products are destined for sale in their own territories. Osram Sylvania Inc
owns the Sylvania trademark in the US, Puerto Rico, Canada and Mexico
while Havells Sylvania owns it in the rest of the world.
The parties also agreed to withdraw all pending litigations in various
jurisdictions and intend to collaborate to strengthen the brand in their
respective territories. In light of the allocation of rights, Havells Sylvania
will receive a one-time fee of US$38 million.
Our stance
We believe one-time payment of US$38 million would help the company
to reduce its consolidated debt to | 634 crore by FY13E and | 484 crore
by FY14E. This would also result in a reduction in interest outgo by ~| 11
crore in FY13E and ~| 13 crore in FY14E. At the CMP of | 600, the stock is
discounting 12.5x FY13E EPS of | 48 and 13.1x FY14E EPS of | 45.7.
However, we are maintaining our target price of | 619/share considering
there has been no change in core earnings. We recommend a HOLD
rating on Havells.
http://content.icicidirect.com/mailimages/ICICIdirect_HavellsIndia_QuickComment.pdf
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