Varroc Engineering falls 9% after firm sells lighting biz at reduced price
Varroc Engineering's shares closed at Rs 338 on Thursday
The company's shares are at its lowest point since July 18, 2022
The company posted a consolidated net loss of Rs 84.51 crore in June Quarter
Varroc Engineering's shares fell 8.71% to 308.55 on Friday after the company announced a revised contract for its 4-wheeler lighting business.
The company said that it will now get 520 million euros, rather than the 600 million euros previously announced. In April of this year, the company and its wholly-owned subsidiary struck a 600 million euro deal with France's Plastic Omnium SE.
Following the announcement, Varroc Engineering's shares fell nearly 9% on Friday before rebounding to Rs 310.65 at 12:30 PM. On Thursday, the stock closed at Rs 338. The price of the company's shares was at its lowest point since July 18, 2022.
Varroc's lighting business provided 54% of the company's entire revenue. Varroc agreed to divest its lighting systems businesses in the United States, Brazil, Mexico, Poland, and four other countries. Plastic Omnium will also be able to purchase Varroc's global R&D India operations as part of the acquisition.
Varroc would receive a post-tax payment of 160-175 million euros, subject to closing adjustments, under the terms of the previous agreement. An escrow sum of 35 million euros was to be distributed over the course of 2-3 years.
However, a rival, Valeo Vision S.A., filed a lawsuit in German courts, alleging infringement of the German parts of various European patents. The complaints sought an injunction against the lighting items as well as information about previous sales. Varroc will compensate Valeo with 51.1 million euros as part of its settlement.
In addition, Varroc Engineering and Valeo Vision have reached an out-of-court settlement regarding IPR infringement proceedings.
The post-tax net cash accretion will now be in the range of 5-9 million euros. Lower demand caused by the Ukraine war and other geopolitical difficulties, which impacted the company's financial prospects, have also been highlighted as some of the other reasons for the transaction valuation drop. Varroc would still have debt on its books when the acquisition is completed totalling Rs 1,300 crore.
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In the June quarter, the auto parts manufacturer and supplier posted a consolidated net loss of Rs 84.51 crore. The company recorded a net loss of Rs 229.28 crore the previous year.