Shares of Crompton Greaves , the engineering conglomerate, gained as much as 16.7 percent intraday Thursday to touch a 3-year high of Rs 216.70 after the board of directors proposed to demerge consumer product business unit into a separate listed company.
While speaking at its annual strategic review meeting on July 16 in Belgium, the board has said that such a demerger will create better growth opportunities for it’s two large but significantly different businesses – power, industrial and automation which is a B2B business, and the consumer products business which is B2C.
The board also believes that this will create a more flexible capital structure for the two businesses to grow independently, allow them to pursue more ambitious strategic goals and, thus, create further value for existing shareholders.
Consumer business, the main growth driver for company in last two-three years, contributes approximately 40 percent towards company’s overall market cap that is around Rs 12,773.09 crore while it contributes around 20-25 percent towards total revenues.
Consumer products business includes manufacturing of fans, appliances, lighting products, pumps, home automation, wiring accessories and integrated security systems. Moreover, the board has constituted a committee of directors to examine all relevant aspects of the process of demerger and listing and make suitable recommendations to the board, says the company in its filing.