The board of directors of SKF India Ltd. has approved the demerger of its automotive and industrial businesses through a scheme of agreement on Tuesday.
It has given the corporate restructuring committee the authority to take steps to prepare a detailed scheme for the proposed demerger, according to an exchange filing.
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The company will consider the detailed scheme and make the required disclosure to the exchanges before taking a final decision.
The industrial business of the company will be carried out through a new wholly-owned subsidiary with a total authorised share capital of Rs 15 lakh, it said.
Additionally, during the subsidiary's incorporation, SKF India will completely own the issued and subscribed share capital.
SKF India reported a revenue of Rs 1,206.2 crore for the second quarter of the financial year 2024–25 compared to Rs 1,149.6 crore in the same quarter last year.
The company, which offers top-quality automotive and industrial solutions, focusses on five main areas: bearings and units, seals, lubrication, condition monitoring, and maintenance services.
Demerger Of Automotive Business
Earlier, SKF India parent AB SKF had announced its decision to demerge its automotive business along with listing it separately on Nasdaq Stockholm.
As mentioned in the exchange filings, a demerger will help in improving customer value, provide better focus on distinct opportunities, and enhance efficiency and competitiveness.
Nuvama, in its note, highlighted that the demerger of its parent company's automotive business will benefit SKF India in terms of increased profitability in the automotive division.
The note also suggested that India could follow the global separation of the automotive and industrial divisions.
Shares of SKF India closed 0.12% higher at Rs 5,168.90 apiece, compared to a 0.88% rise in the benchmark NSE Nifty.
The stock has fallen 2.32% in the last 12 months and has risen 12.36% year-to-date. The relative strength index was 31.89.
Of the 12 analysts tracking the company, nine recommend a "buy" and three suggest a "hold," according to Bloomberg data. The average 12-month analysts' consensus price target implies an upside of 9.3%.
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