The idea is that once the business demerges, it will have its own capital allocation, own board, own corp governance etc.
Investors will get a better insight into the business quality through more metrics – and it will start to become a pure play on a specific theme or sector in the market.
And all of this should lead to better valuation and value unlock than it was by sitting inside the parent entity alongside 7-8 other businesses.
Look at Motherson (a little bit more complicated than a simple demerger) – where you got the domestic wiring harness business as a separate entity – this business MSWIL is a much better (static) business than the rest of Motherson Group – it has a ROCE of 60% for FY22, and currently trades at NTM P/E of 37x.
Fwiw, I sold MSWIL at 85-87, and have continued to (bag)hold SAMIL – which is more of a play on recovery of auto globally, capital allocation of the Sehgals, and improvement in existing businesses.
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