GHCL hits new high amid heavy volumes; stock surges 28% in one week

GHCL had received 'No adverse observation/ No objection' letters from the BSE and the National Stock Exchange of India for a proposed scheme of arrangement on March 3

Shares of GHCL hit a new high of Rs 528.85, surging 7 per cent on the BSE in Monday's intra-day trade, amid heavy volumes. It surpassed its previous high of Rs 499.45 touched on March 11, 2022.

The stock of the commodity chemicals company was trading higher for the fifth straight day, having rallied 28 per cent in the past 1 week, as compared to 6 per cent rise in the S&P BSE Sensex. At 01:43 PM, GHCL was up 6 per cent at Rs 524, as against 1.2 per cent gain in the benchmark index. Trading volumes on the counter jumped over three-fold with a combined around 1.9 million equity shares having changed hands on the NSE and BSE till the time of writing of this report.

GHCL is a diversified company having presence in chemicals, textiles and consumer products segment. GHCL is one of the leading manufacturers of soda Ash, being its core business and a strategic growth pillar.

GHCL had received 'No adverse observation/ No objection' letters from the BSE and the National Stock Exchange of India on March 3, 2022. for a proposed scheme of arrangement.

On December 6, 2021, the board of directors of GHCL had approved a Scheme of Arrangement involving demerger of spinning business division of GHCL to GHCL Textiles, subject to receipt of applicable regulatory approvals. The company expects this new scheme to be completed by around September 2022.

GHCL also divested its home textiles business to Indo Count Industries for Rs 596 crore. The Company believes that this sale would unlock the value for its stakeholders as the proceeds of the sale would be used to grow its core business of chemicals.

Analyst at Kotak Securities believe divestment of home textile business is in the right direction as the transaction would help the company to reduce the debt of the textile (including spinning) business and would also help the company to fund the growth capex. Though, the contribution from the business was marginal, Rs 160 crore of debt payment would lower the interest burden by Rs 12-13 crore.

"The proposed demerger of spinning business is expected to now get complete by Sep’22. Going ahead, we believe the strong volume coupled with improvement in operating efficiency is expected to drive inorganic chemical earnings. On the other hand, value added product, improvement in operating efficiency and positive prices is expected to support textile segment performance," the brokerage firm had said in event update.