Promoters of Emami may look at sale of land parcels and non-core assets as part of a deleveraging plan.

Promoter pledging in Emami has come down to below 55 per cent from a high of 90 per cent after the sale of the cement business. According to the shareholding pattern filed with the stock exchanges by Emami, as on August 14, 54.26 per cent of promoter holding was pledged. Emami's borrowing against shares is around Rs 1,130 crore.

Promoters expect pledged shares to come down to a 50 per cent-level shortly. The target is to bring it down further by March. In a post-earnings analyst call, Mohan Goenka, director, Emami Group, said in response to the reduction of pledging and borrowings, "We would try to get rid of this by end of March once the deal concludes for any of our lands or other assets. Then you would see the pledge coming down."

Last month, the Emami Group completed divestment of its 100 per cent stake in Emami Cement to Nuvoco Corporation for an enterprise value of Rs 5,500 crore. Now, with most of the deleveraging concerns behind, analysts expect promoters to focus on the core business.

In keeping with the accent on health and hygiene in the wake of the coronavirus (Covid-19) pandemic, Emami will be focusing on Zandu and BoroPlus, its two major brands in the segment. The Zandu brand has seen a 27-30 per cent growth in the last three to four months. Emami plans to cash in on the momentum and around 20-30 new launches under Zandu have been identified.

According to the company's investor presentation post-June quarter results, the healthcare range has seen a 23 per cent growth in the quarter; in June, growth was at 59 per cent. The BoroPlus range saw a 28 per cent growth in the first quarter and 92 per cent in June.

The deleveraging exercise at the promoter level, coupled with growth from healthcare range amidst tight cost control, has led to a rerating of the stock. After it surprised the market by maintaining profit despite revenue fall, the Emami scrip has risen by 44 per cent, up from Rs 238 a piece and closed at Rs 342.50 on Tuesday.

Emami had appointed AT Kearney to chart out the course for cost reduction, which helped it increase margins during the quarter. Gross margins increased 230 bps at 66.5 per cent and EBIDTA margins by 490 bps at 25.5 per cent. The cost reduction target for the year is Rs 50-60 crore.