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SKF India Demerger
SKF India board has approved a scheme of arrangement to demerge its industrial business into a wholly owned subsidiary, creating two listed companies with mirror shareholding. The resulting company (SKF India Industrial) will have the industrial business and the exiting SKF India will have the automotive business
As part of the demerger, SKF India Industrial will issue 1 equity share for every share held in SKF India. The proposed transaction is subject to approvals from statutory and regulatory authorities
We believe that the scheme of demerging Industrial business will create better visibility and understanding of both the businesses
Industrial business, which contributes 63% to total revenues as of FY24, is witnessing relatively better growth led by strong double-digit growth in segments like railways, heavy industries & metals. On the margins front, company remains focused on increasing localisation in industrial business which will help in securing more orders and margin improvement
We believe that this demerger will unlock more value to shareholders considering the expected improvement in capital allocation and operational efficiency in the two separate businesses. Also, industrial businesses generally command better valuations
We have a target price of Rs 6060 on SKF India
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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