INSUBCONTINENT EXCLUSIVE:
Mumbai: Companies are increasingly absorbing their unlisted units to simplify their holding structure and benefit from the Goods and
In the past few weeks, several listed entities, such as Hindustan Unilever, Lux Industries, Orient Refractories, and Hindustan Foods, have
brought some of their unlisted businesses under their umbrellas, a move that analysts believe will benefit the companies’
shareholders.
“It is an encouraging trend because it will simplify their holding structure by bringing their common businesses at one
place to reduce related-party transactions and remove potential conflicts of interest
It is a sign of good corporate governance,” said Ravi Sardana, EVP, ICICI Securities
“As promoter and non-promoter interests are aligned, markets have rewarded such restructurings and the shares have seen a
rerating.”
Last month, India’s largest consumer goods company Hindustan Unilever merged its foods and refreshment subsidiary into the
company on grounds that the move will help it drive synergies and make the parent company more consumer-centric.
Early in August, Orient
Refractories, a supplier of high-grade refractory products, announced its plans to merge its two unlisted subsidiaries — RHI India and RHI
Clasil — with itself for better operational efficiency and simple holding structure.
Analysts said the new tax regime had forced companies
to streamline their businesses
“Partly, companies are consolidating their similar-products (businesses) under one roof for (GST) benefits,” said Sanjiv Bhasin,
executive VP-markets, IIFL.
Last month, the board of hosiery major Lux Industries approved the merger of two promoter group firms — J M
Hosiery and Ebell Fashions — with itself in a non-cash deal at a combined valuation of ₹861 crore
This deal, according to the company, will help minority shareholders unlock value.
Recently, Hindustan Foods also announced the scheme of
arrangement for demerger of contract manufacturing business of Avalon Cosmetics Pvt
Ltd into the company.
In August 2017, the domestic arm of German automotive and industrial major Schaeffler (formerly known as FAG Bearings
India) merged its two arms — INA Bearings and LuK India — to improve cost and supply-side efficiencies
The stock has moved 30% since then.
Last year, capital market regulator Sebi had introduced more checks and balances for mergers and
acquisitions involving unlisted companies to curb manipulation
The concept of reverse merger was stopped following complaints that mergers of various unlisted companies with small and unknown listed
companies were suspicious.
