Honeywell

The stock price tumbled down yesterday like into a bottomless pit after the company after all hopes of delisting were crashed when the parent company, Honeywell Asia Pacific Inc issued a statement saying that it intends to reduce in due course its shareholding in the company. It expects to do this through Offer for sale in one or more tranches. The foreign parent currently holds 81.24% stake and as per SEBI norms, it will have to bring down this stake to 75% by 3rd June 2013.

Delisting was the main ingredient making the stock look extremely delectable because on the performance front, this process control and industrial automation major, which has a 31st Dec year ending, did not have a very good showing in Q1 and Q2. The current Q3 ended 30th Sept was slightly better, with topline falling 0.8% (YoY) at Rs.408 crore. It reduced its operating expenses by 2% and lower tax outgo too; these together helped it post a 31% rise in net profit at Rs.21 crore. But it seems very apparent that the company will end CY12 on a much lower note. Its net profit at end of 9MCY12 was at Rs.49 crore and CY11 had a net profit of Rs.107 crore. Surely, purely on operational efficiency, it will not be able to surpass CY11 numbers, unless it comes up with some ‘exceptional income’ to the rescue. Despite these facts, the company is sound, debt free and has been operating in the Indian geography for over 27 years now. The company is sitting on huge reserves of Rs.621 crore, which is 70 times the equity capital of Rs.8.84 crore! Despite sitting on so much, the company is not announcing any new plans for expansion or even acquisitions. Compared to the money in hand, it remains extremely conservative distributor, where in CY10 and now in CY11 it gave a dividend of 100%, though it has no history of a bonus at all.