CESC to demerge into four Shareholders to get equal stake in all

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RP Sanjiv Goenka Group’s flagship CESC is being split into four companies thro-ugh a mirror image demerger. By this, the company is trying to unlock the real value, simplify the present corporate structure and ensure focused management of each of the verticals.

In the new scheme of things, all power distribution business of the group will come under CESC; all generation activity will be housed in CESC Generation; retail business Spencer’s will be a separate company; and all non-power and other retail will be under CESC Ventures.

The group’s BPO company, sports business, FMCG and real estate will be brought under CESC Ventures, said Sanjiv Goenka, chairman, CESC. Goenka is also chairman of the group. All these four entities will be listed and the effective demerger date will be October 1.

“This is a mirror image demerger. Every shareholder of CESC will get shares of all these four companies. They will get same proportion of shares in each of the four companies," he said, adding that there will be no holding company.

“The paid-up capital of CESC is Rs 132 crore but it has been increased to Rs 198 crore by way of gift, or similar to bonus but cannot be termed as bonus. Shareholders will get additional value worth Rs 66 crore when they get fresh shares of the four demerged entities. Post-restructuring, for each 10 shares of CESC, a shareholder will get five shares of Rs 10 each in generation, distribution, two shares in CESC Ventures and six shares in Spencers (face value of Rs 5 each),” said Goenka.

The company which will house all the power generation will have a present capacity of 2550mw, while CESC will handle power distribution at Kolkata, Noida, Bikaner, Kota and Bharatpur, catering to about 35 lakh consumers.

Responding to queries on debt distribution, Goenka said that CESC' s debts are very low. Whatever debt has been taken for distribution will go to distribution company and whatever debt was taken for generation will go to generation company. Spencer's, on its parts, is debt-free, he said.

Meanwhile, CESC’s net profit remained almost flat at Rs 295 crore in the January-March quarter compared to the year-ago period, which was at Rs 293 crore. Total income grew 6.7 per cent to Rs 1,572 crore, the company said in a filing.

Its net profit for 2016-17 was at Rs 824 crore as against Rs 812 crore in the previous financial year. The company’s earnings before interest, tax, depreciation and amortisation (Ebitda) fell by nearly half to Rs 263 crore. Ebitda margins contracted to 16.7 per cent from 34.2 per cent over a year ago.

The company’s shares fell nearly 17 per cent to levels of Rs 815 per share, the most in more than four years after the company announced its restructuring plans.

ritwikmukherjee@mydigitalfc.com

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