The Hindu Business Line : Real benefit for Grasim shareholders depends on swap ratio of Samruddhi with UltraTech

Mumbai, Oct. 3 The real benefit to Grasim’s shareholders from the de-merger of its cement business depends on the swap ratio at which the de-merged entity – Samruddhi Cement – is merged with UltraTech Cement at a later date, according to analysts.

According to sources in financial institutions, major institutional investors led by LIC (which has 12.59 per cent stake) will take a call at a meeting next week on the de-merger. So far so good, is what many analysts said about the de-merger.

restructuring

“The restructuring by Grasim will allow it to grow faster and the 1:1 ratio seems reasonable. It will take some time to gauge how good this restructuring plan will be for the group.

“Now the efficiency of the company will be better,” said Mr Jagannadham Thunuguntla, Head Equities at SMC Capitals.

When the markets are in a bull phase, any such news of a demerger is taken in a positive sentiment and the share prices of the companies concerned usually rise, while the same news in falling markets would impact the share prices of the companies negatively, said Mr Arun Kejriwal, who heads Kejriwal Research & Information Services.

While a large section of analysts are taking a positive view of the de-merger, some feel otherwise.

“There is not much advantage of the de-merger for Grasim’s shareholders. Post de-merger, the company’s size will come down to a quarter.

“Almost 65 per cent of the company’s revenue comes from the cement business,” said Mr Deven Choksey, Managing Director, KR Choksey.

Under pressure

The Grasim scrip could remain under pressure and notice a downtrend from its current market value.

Investors of Grasim have three choices. They could either sell their Grasim shares once the market opens on Monday, or at a later date sell the standalone shares of either or both Grasim and the newly allotted shares of Samruddhi Cement (once the entity gets listed) or alternatively once the swap ratio of Samruddhi and UltraTech are decided the investors can opt to sell the shares of Samruddhi or stay invested until the final merged entity between Samruddhi and UltraTech is born, said analysts.

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