Demerger in CESC Ltd - Kotak PCG Research

DEMERGER IN CESC LTD - BUY - TP Rs.1211

- CESC has in May 2017 announced the much expected restructuring of its business into four distinct parts—distribution (Kolkata and franchisee assets), generation (Kolkata, Chandrapur and Haldia), retail (Spencers and Music World) and other ventures (First Source and Quest Mall). The re-structuring will be a mirror image de-merger and does not entail any change in ownership structure. Post the above restructuring, a Shareholder holding 10 shares in CESC Ltd will get 5 shares of CESC Ltd, 5 shares of CESC Genco, 6 shares of Spencer's Retail Ltd and 2 shares of CESC Ventures Ltd. The three new entities will be listed in due course of time.

- We view the re-structuring positively, as it would not only simplify corporate structure but will also allow the management to focus on the individual businesses to enhance efficiencies, accelerate growth, facilitate access to capital and, most importantly, unlock shareholders' value.

- The effective date of the demerger will be 1st of October 2017. Subject to clearance from regulators, the various demerged entities would likely get listed by Q4FY18.

Shares of CESC LTD. was last trading in BSE at Rs.1041.2 as compared to the previous close of Rs. 1048.6. The total number of shares traded during the day was 36355 in over 1206 trades.

The stock hit an intraday high of Rs. 1056.7 and intraday low of 1034. The net turnover during the day was Rs. 37924195.

Source : Equity Bulls

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