In a proposed restructuring of equity holdings, 18 per cent of the equity stake in India-listed Siemens is likely to change hands between promoter companies – Siemens AG and Siemens Energy, with the former to pay the latter €2.1 billion for the stake. Part of the agreements arrived at includes a demerger of the energy division of the Indian arm into a separate listed entity.
The move will provide financially troubled Siemens Energy with an immediate cash inflow, in lieu of its stake in the India-listed entity.
Siemens AG intends to enter into a share purchase agreement with Siemens Energy to acquire an 18 per cent stake in Siemens Ltd. India from Siemens Energy for a purchase price of €2.1 billion in cash, the parent company said in its statement.
India-listed Siemens’ board will consider, at an appropriate time, the two proposals by Siemens and Siemens Energy – purchase of an additional 18 per cent equity in Siemens Limited from Siemens Energy and demerger of the company’s energy business into a separate stock market listed entity, the Indian entity said in a response to Business Standard.
Once the demerged entity is listed, Siemens Energy is to ultimately acquire a controlling stake in the demerged energy business. “The aim is to complete the demerger in 2025 – significantly earlier than previously planned,” Siemens AG said.
For the June 23-ended quarter (Q1 FY24), the energy segment contributed 31 per cent to the company’s overall consolidated revenue from operations of Rs 4,873.2 crore. The business division’s contribution was at 33 per cent in the same quarter.
It is not clear at what valuation the business will be demerged.
Past attempts of the sale of business divisions to promoter companies have not been met with shareholder optimism over valuations. In July, the shareholders of the company voted against the proposed sale and transfer of the new low-voltage motors and geared motors businesses to a parent company’s German arm.
Post the €2.1 billion transaction, Siemens’ stake in the publicly listed Siemens Ltd. India would increase to 69 per cent from the current 51 per cent, while Siemens Energy’s stake would decrease to 6 per cent from 24 per cent. The total promoter shareholding in the company will remain unchanged.
The transfer of cash from parent Siemens AG to Siemens Energy in lieu of stake in the Indian entity is expected to bring partial relief to the energy entity which is facing losses in its wind turbine business. The deal, Siemens AG said, has been agreed at a discount of 15 per cent on the 5-trading-days volume-weighted average price before the day of signing the agreement.
“Together, we shaped a solution that is in the best possible interests of all parties and accelerates the separation of Siemens and Siemens Energy in India,” said Roland Busch, President and Chief Executive Officer of Siemens AG.
He added, “Besides the immediate cash inflow, we are also enabling an additional line for customer guarantees, making a strong overall contribution to the future stability and growth of Siemens Energy.” The statement added Siemens AG will provide no new guarantees to Siemens Energy.
In Wednesday’s trade, Siemens in India closed at Rs 3,495.35, up 2.26 per cent from its previous trading day’s close.
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