GHCL sells home textiles business to Indo Count Industries

GHCL (formerly Gujarat Heavy Chemicals Ltd) completed the divestment of its Home Textile business to one of India’s leading manufacturer and exporter of home textiles; Indo Count Industries. The total consideration for the deal is Rs.609 crore.

This deal will make Indo Count Industries the largest global home textile bedding manufacturer. It also helps GHCL to get rid of its non-core businesses and align it to a more textile driven company like ICIL.

GHCL plans to utilize the consideration of Rs.608 crore for its core business projects. It plans to use the money to bank roll some of its greenfield project, expansion of its core product portfolio, investments in green & clean energy, stitching up strategic JVs that are relevant to its core business, automation of operations and other ESG initiatives. In short, ICIL will be better able to leverage the textile franchise while GHCL can put the money to better use.

The deal to sell the home textiles business to Indo Count is effective April 2, 2022. Other basic formalities pertaining to the deal like closing date adjustment of working capital are still pending.

According to the managing director of GHCL, the divestment of the home textiles business will unlock value for all stakeholders. GHCL would prefer to focus on its core competence of heavy chemicals even as Indo Count invests in market expansion.
 

While the benefits for GHCL are more to do with streamlining operations, the benefits for Indo Count Industries will be more on the business expansion and portfolio enrichment front.

Here are a few cues on how Indo Count will gain from the deal.

1) Indo Count becomes the world's largest Home Textile bedding manufacturer with 153 million meters of annual capacity. It boosts their top line by Rs.1,500 crore.

2) It gives a degree of completeness to the Indo Count product portfolio as well as a ready base of GHCL customers. This will also help expand their institutional business.

3) Better capacity utilization would mean better economies of scale and the ability to offer more flexible offerings to customers in the home textiles segment.

The stock market performance, which is the best barometer has resulted in value accretion for both the stocks. Both stocks have rallied sharply in the last few weeks and that is an indication that the market is positively viewing the synergies arising from the hiving off.

For GHCL, it is about returning focus to its core business model. For Indo Count it is about enhancing and enriching the customer offering and offering a better customer experience.