Motherson Sumi Systems shares slide 22%; here’s why, Auto News, ET Auto

Motherson Sumi Systems shares slide 22%; here's why
New Delhi:
Shares of Motherson Sumi Systems dropped 22 per cent in Friday’s session on the National Stock Exchange (NSE) ahead of the company’s record date for the demerger of its wiring harness undertaking.

The board of auto parts maker has fixed the record date for the scheme of arrangement as Monday, January 17. According to the stock exchange intimation, existing Motherson stock will trade ex-domestic wiring harness from Friday.

Following the update, shares of Motherson Sumi System dropped 22.12 per cent to Rs 182.85 on Friday on NSE. The scrip had settled at Rs 234.80 on Thursday.

Benchmark index and BSE barometer Sensex was trading 253.24 points or 0.41 per cent lower at 60,982.06 at the time of writing this report.

Under the proposed restructuring, the domestic wiring harness business will be demerged from the existing entity and listed separately by March.

The demerged entity would be called Motherson Sumi Wiring India (MSWIL). The existing company, Motherson Sumi Systems, will be merged into promoter-held Samvardhana Motherson International (SAMIL).

Shareholders will get one share of each of the demerged and existing entities.

According to various media reports, the fair value of SAMIL is pegged between Rs 170-230 per share, while that of the domestic wiring harness is estimated at Rs 60-80 apiece.

The demerger will help simplify the group structure and create a stronger platform for growth. It will result in value accretion of 5 per cent based on the trailing 12-month financial performance of the two entities.

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The restructuring, which started in July 2020 and has led to the creation of two companies, is done to simplify group structure as well as align itself for ‘Vision 2025’ which targets revenues of USD 36 billion with 40% return on capital employed, the company said.