Mid-sized corporates are consolidating their core business and selling off unrelated or diversified businesses. At least 21 companies have told stock exchanges in the last six months that they plan to demerge unrelated businesses.
The companies plan to do this either by selling them -- if they are housed in a separate company -- or hiving them off into separate entities and then hawking them.
Companies that have plans to demerge their divisions include Vardhaman Spinning Mills, Suryalakshmi Cotton, Cipla, Pudumjee Agro, Chambal Fertilisers, Eveready Industries, Minda Industries, Rico, Bharat Bijlee, Gontermann Peipers and LG Balakrishnan.
Vardhaman Spinning has proposed to demerge its textile division into Mahavir Spinning. As a result of the demerger, Vardhman shareholders will get eight shares of Mahavir Spinning for every 10 shares held in the company, while retaining two shares of face value of Rs 10 each.
This means 10 shares of Vardhaman Spinning at the current market value of Rs 2,091.50 will result in eight shares of Mahavir Spinning valued at Rs 1,848, while the two remaining shares will be worth Rs 418, assuming the later's price remains unchanged at Rs 209.15 per share. This means a profit of Rs 275 for shareholders.
Another textile company, Suryalakshmi Cotton Mills, has approved a proposal to demerge its yarn division into the newly incorporated Rajvir Industries.
Shareholders of Suryalakshmi will get shares in the new company in a ratio that will be determined by independent valuers. The shares of Rajvir Industries will also be listed.
Jindal Photo has approved the demerger of its photographic business into a new company. Jindal Photo shareholders have got shares of Rs 10 each, fully paid up, in the new company in a 24:100 ratio.
Bharat Bijlee has approved a scheme of demerger wherein all the specified assets and liabilities of its lift field operations business will be transferred to Tiger Elevator Ltd for Rs 47.75 crore (Rs 477.5 million).
RICO Auto Industries has got the approval to sell its agro division at Bundi in Rajasthan to Adani Wilmar for over Rs 7.66 crore (Rs 76.6 million).
Eveready Industries has approved the demerger of its bulk tea division into ECIL. The demerged company will continue to run the fast moving consumer goods business, involving the manufacture and sale of dry cell batteries, flashlights and packaged tea.
The existing paid up share capital of the company will be equally divided between the two entities with shareholders getting shares in both companies in an equal proportion.
