ICI India: Hold

Recommendation: Hold

Anup Menon

The ICI India stock, which was trading in the Rs 220-250 range in January 2000, has fallen sharply to around Rs 86.

It trades at a price earnings multiple of around 14 times its latest annualised earnings per share. Its recent earnings performance has not been impressive. ICI (India) has also been restructuring operations to focus on its core business. However, it may take time for the company to improve its financials. Hence, fresh exposures need be considered only with a significant improvement in the financials.

Business: ICI (India) is the fourth largest players in the domestic paints industry. Apart from paints the other core businesses for the company include specialty chemicals and starch. It also has interests in segments such as rubber chemicals and pharmaceuticals. It has a market share of around 11.54 per cent in the paints industry.

Prospects: ICI's prospects for the near term will depend on the outcome of its re-structuring moves. The company is re-aligning its businesses with the global profile of ICI Plc by concentrating on specialty chemicals and paints.

It has spun off its industrial paints division into a joint venture with Berger Paints. ICI (India) was at a major disadvantage in this segment as it did not have access to the latest technology. Given Berger's expertise and higher growth rates in this segment, the company's performance should improve.

Meanwhile, ICI (India) has decided to sell its polyurethane unit to Huntsman Corporation, US, for Rs 82 crore. The cash flow from the sale came in at an opportune moment, considering that ICI (India)'s financials are not so healthy.

The company's performance has not been very good. Though it has restructured operations, it still holds a few non-core businesses. Fresh investments need not be considered at present levels.