Investor concerns make Siemens, Endurance drop revamps

Mumbai: Investor concern has made a definitive entry into boardroom. On Wednesday, multinational industrial manufacturing company Siemens said it was dropping a plan to sell its mobility division and mechanical drives business to its parent, Siemens AG. The next day, auto-ancillaries maker Endurance Technologies withdrew its plan of entering into manufacturing of two- and threewheeler tyres.

Endurance announced its plan on sidelines of June quarter result and later attempted to convince investors that the plan is still at evaluation stage after its stock fell 20%. On Friday, the stock rose 15% to Rs 849 after company withdrew its plans. Siemens stock rose 2% to Rs 1,167 on Friday.

“Both these decisions certainly did not go down well with investors, but these companies listened to investors’ concerns and reversed their decisions,” said Shriram Subramanian, founder, InGovern Research Services. “Otherwise these kinds of decisions had shown them in a bad light.”

Several investors and analysts raised concerns over the sale of the Siemens’s mobility division and mechanical drives business which together account for about 16% of the total revenue to its parent citing deprival of growth prospects to minority shareholders.

On the other side, a foray into tyre manufacturing would have dented Endurance Technologies’ profitability and return profile significantly, leading to stock de-rating, said analysts.

“We are perplexed with the management’s strategic direction as tyre business is totally distinct from Endurance’s existing core businesses, has a lot of established players and is a capital intensive game with longer payback periods,” said Priya Ranjan, analyst, Antique Stock Broking.

The company said that the management reconsidered the decision and decided not to pursue the aforementioned project after feedback from important stakeholders.

“While the management believed that the proposal for expansion into tyre manufacturing is appropriate strategy for the growth of the company, investors expressed reservations and requested the management to reconsider the same,” said the company in a stock exchange filing.

Endurance Technologies makes aluminium casting, including alloy wheels, suspension, transmission and braking products.

In February, Jubilant Bhartia Group withdrew plans to seek corporate brand loyalty from its three group companies Jubilant Food-Works, Jubilant Life Sciences and Jubilant Industries. Boards of these companies approved payment of 0.25% of their respective consolidated revenues to Jubilant Enpro, a promoter group company from FY2020.

In 2016, VRL had announced its desire to enter the aviation space following which the stock took a severe beating. VRL Logistics surged 20% after promoters scrapped the plan.

In 2015, giving in to pressure from investors and analysts, the management of DCB Bank had decided to change its aggressive branch expansion strategy after the stock lost 30% value in two days.