Dry cell battery maker Eveready Industries has buried the ghost of the past by making provisions for the inter corporate deposits (ICD) and corporate guarantees given to group entities over the years.

The company, run by the Khaitan family of Calcutta, took a one-time hit of Rs 629.7 crore in the fourth quarter to clean up the balance sheet. As a result, it ended the quarter and the fiscal with a loss, overshadowing stellar operational performance recorded in the last nine months of 2020-21.

Eveready had been extending assistance to group entities to support ailing engineering firm McNally Bharat for the last 7-8 years. However, a large amount had fallen due at the end of fiscal 2019. External auditor Price Waterhouse had resigned calling out the irregular financial transactions.

The provision taken on Friday includes Rs 489.28 crore on account of ICDs, corporate guarantees and interest of Rs 68.41 crore thereof. Moreover, the company also provided for Rs 72 crore given as advance to a third party for a land parcel.

“The board of the directors and the audit committee decided that Eveready should make this provision and clean up the balance sheet. This exercise will enable us to take the company forward. My aim is to make it debt free in two years,” Amritanshu Khaitan, managing director of the company, told The Telegraph.

Eveready has a debt of Rs 400 crore. No dividend was declared as a result of the loss after the provision, even though the company had informed the shareholders that the board would consider a dividend as late as on June 10. It had a profit of Rs 132 crore at the end of nine months ended December 31, 2020. However, the stock jumped by 6 per cent post result and it closed the day at Rs 333.35 on the BSE.

Williamson Magor Group, which has three operating companies — Eveready (EIL), bulk tea producer McLeod Russel India Ltd (MRIL) and McNally Bharat Engineering (MBE) — are in the throes of a financial crisis due to sustained losses by MBE. Lenders of the companies are charting out tailor-made restructuring for each of the firms. However, the exercise has been delayed due to the pandemic.

Promoter holding of EIL and MRIL came down sharply in the last two years as they also pledged the shares to raise loans to support MBE.

Operational highlights

Eveready, which earns half of its revenue from batteries and flashlights, posted the highest ever operating EBIDTA for a year, clocking Rs 224.7 crore, a gain of 86 per cent over the last fiscal. However, net loss for the quarter and the year stood at Rs 441.2 crore and Rs 309.13 crore, respectively, due to the provisions.

Operating income for the quarter rose 22 per cent due to a low base of Rs 272.6 crore last year. For the full year, it stood at Rs 1,249 crore, a gain of 3 per cent over the previous year.

The company said it has taken a price hike of 4 per cent in batteries to mitigate the cost push of raw material zinc. The lighting segment this year also became EBIDTA positive.