Why Crompton Greaves Share Price is Falling

Finding an oasis in a desert is a more feasible task than predicting an earnings turnaround in a cyclical industry, especially when the company is undergoing a hiving off process.

In such cases, there are many unknowns... the timeline of the process, costs, benefits, etc. All this makes predicting earnings a very daunting task.

Crompton Greaves Consumer Electricals is one such company. It operates in a cyclical industry and has been struggling with poor earnings amid a group-wide restructuring.

The company's stock price has taken a significant hit, falling by approximately 30% compared to 6% gains in the BSE Sensex over the past year.

Yesterday, 25 April 2023, the stock suffered a 12% fall, adding to the months-long trend of declining stock prices. Today again, the stock fell 2%.

Let's take a look into the reasons behind the ongoing slump in Crompton Greaves Consumer Electricals share price.

#1 CEO's Resignation

On Monday, post market hours, the company informed exchanges that Promeet Ghosh has been appointed as the new MD & CEO.

Ghosh's appointment is for a period of five years. He will assume charge starting 1 May 2023 till 30 April 2028.

The company informed that Mathew Job has resigned from the position effective 24 April 2023, and has also resigned as the company's CEO with his last day as CEO being the 30 April 2023. He resigned to pursue other career interests, according to the filing.

Mathew joined the company in September 2015 and in his 8-year stint as the CEO, the company's marketcap has grown more than 3 times.

Following this news, shares of Crompton Greaves Consumer Electricals saw a knee-jerk reaction and slumped as much as 13% intraday. The stock reached a new 52-week low of Rs 255.

The resignation of a CEO can have a significant impact on a company's stock price, but the direction and magnitude of the impact can vary depending on the circumstances surrounding the resignation.

Change in top level management always has an impact on the stock. In Crompton Greaves' case, shareholders were not happy. They might be concerned about how the new CEO, who has a finance background, might be able to turn the fortunes of a consumer durables company.

Other reasons why Crompton Greaves share price is falling

The company's CEO resigning is latest news and the markets factored in a 12% fall in the company's stock price yesterday.

However, shares of Crompton Greaves have been on a downward trajectory since many months...

Crompton Greaves Consumer was first hived off from the Crompton Group in 2015. This decision was big and came at a time when consumption stocks were commanding a premium.

Following the demerger, the company had to alter its restructuring plans after the Dalal Street frowned upon its ownership structure.

The Crompton group, which was the majority shareholder in Crompton Greaves Consumer at the time, initially opposed the move, but eventually agreed to the hive off on the condition that it would retain a significant stake.

Since then, Crompton Greaves Consumer Electricals has been operating as a separate entity, with its own management team and board of directors.

Initially, the markets factored in the demerger news with caution and the company's share price saw a decent correction in a matter of weeks. However, in the long run, the hive-off was seen as a positive move for both companies.

At the moment, volatility in commodity prices due to geopolitical issues and inflation, have kept the company's margins in check.

Also, in the domestic market, competition has intensified. This has put additional pressure on margins. Companies like Havells India have been establishing a strong consumer connect and brand recall.

Strong growth prospects

The company's merger with Butterfly Gandhimathi is expected to bear fruit in the future.

In March 2023, the company proposed a scheme of amalgamation of Butterfly Gandhimathi with itself. Butterfly Gandhimathi is among the top three kitchen and small domestic appliances players in India.

This merger will drive revenue growth of the company and lead to cost synergies. It's also in line with the company's strategy for pan-India expansion by cross-selling products across channels.

This acquisition has already started to contribute to the company's growth as Butterfly Gandhimathi's revenue has grown in 2023 on the back of growth across all categories.

Also, there have been some changes in the fan industry recently. In early 2023, ceiling fans came under revised energy efficiency norms, with star ratings linked to their power consumption.

Mathew Job had spoken in an interview about how CG Consumer aims to get these fans to customers as quickly as possible, with a minimal price hike.

The company's consumer products business comprises of fans, light sources & luminaries and other household electrical appliances such as geysers, mixers etc. This works as a moat. This business has very strong return ratios and can be considered as a cash cow for the company.

It's no wonder that the company continues to be a leader in the fan market with a 27% market share as of December 2022.

How Crompton Greaves share price has performed recently

In the past one year, Crompton Greaves share price has fallen around 30%.

Most of the losses have come in 2023 with shares falling around 22% on a year to date basis.

Crompton Greaves has a 52-week high of Rs 429 touched on 13 September 2022 and a 52-week low of Rs 255 touched on 25 April 2023.

Have a look at the table below to compare it with peers.

Comparative Analysis

Company	Crompton Greaves	IFB Industries	Bajaj Electricals	Whirlpool
ROE (%)	28.3	-7.2	7.6	18.2
ROCE (%)	24.3	-4.3	12.3	21.1
Latest EPS (Rs)	8.0	-0.8	17.7	18.9
TTM PE (x)	32.5	0.0	61.1	70.0
TTM Price to book (x)	6.5	5.2	6.8	4.9
Dividend yield (%)	1.0	0.0	0.3	0.4
Industry PE	59.2
Industry PB	5.2

Data Source: Ace Equity, Equitymaster

About Crompton Greaves

Crompton Greaves Consumer Electricals is a leading player in India's consumer electricals sector. It has a wide portfolio of products, which includes fans, lighting, pumps, and household appliances.

The company dates its origin back to 1947 when L K Thapar, an eminent Indian industrialist, took over Crompton Parkinson Works and Greaves Cotton & Crompton Parkinson. In 1966, the two companies merged to form CG Power and Industrial Solutions.

To know more about the company, you can check out and Crompton Greaves financial factsheet and Crompton Greaves latest quarterly results.

You can also compare Crompton Greaves with its peers:

Crompton Greaves Consumer Elec. vs Bajaj Electricals

Crompton Greaves Consumer Elec. vs Symphony

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