In a dramatic market move that has investors buzzing, shares of Siemens Ltd soared an impressive 20% on Monday, April 7, as the engineering giant’s highly anticipated energy business demerger became official. The stock, which opened at ₹2,571 on BSE, surged to ₹2,940 on NSE, marking one of the most significant single-day gains for the capital goods heavyweight in recent history.
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The Demerger That’s Reshaping Siemens India
Monday marked the record date for Siemens‘ strategic demerger, a move that will create two independent publicly traded powerhouses. Under the arrangement, eligible shareholders will receive one share of the newly formed Siemens Energy India for every share they hold in Siemens India, following a straightforward 1:1 ratio.
“This is a watershed moment for Siemens in India,” said a market analyst tracking the company. “The demerger effectively unlocks significant value for shareholders by creating two focused entities that can pursue their distinct growth strategies more effectively.”
The spin-off follows approval from the National Company Law Tribunal on March 26 and comes nearly five years after Siemens AG — the global parent — spun off its energy business worldwide in 2020.
What This Means for Investors
For investors who kept a close eye on the calendar, Friday, April 4, was crucial — it represented the last trading day to purchase Siemens shares to qualify for the allotment of Siemens Energy India shares under India’s T+1 settlement cycle.
During a special pre-open session on April 7, the “constant price” for Siemens Energy India was discovered and subtracted from Siemens India’s share price. This constant price represents the difference between Siemens India’s closing price on April 4 and the opening price determined during the special session.
The Energy Business: A Significant Piece of the Pie
What makes this demerger particularly significant is the substantial contribution the energy vertical has made to Siemens India’s overall business. The energy division has consistently accounted for approximately 35% of Siemens India’s revenues and 40% of its EBIT (Earnings Before Interest and Taxes) over FY21 to FY24.
Siemens Energy India’s operations span the entire energy value chain, offering integrated products, solutions, and services including:
- Grid technologies
- Industrial power generation
- Gas services
- Generation, transmission, and industrial projects
As of FY24, the energy business boasted an impressive order book of ₹10,050 crore and secured new orders worth ₹8,800 crore during the fiscal year.
What’s Next for Siemens Energy India?
According to IIFL Securities, the listing process for Siemens Energy India is expected to take 60 to 90 days from the record date, potentially aligning with the German parent’s guidance of a June 2025 listing.
In the interim period, passive fund managers will maintain Siemens Energy India within NSE and BSE indices for three days after the company lists on Indian exchanges.
Analyst Expectations
The market is abuzz with valuation estimates for the newly formed entity:
- IIFL Securities projects a price band of ₹1,650 to ₹2,000 for Siemens Energy India, with a base case price target of ₹3,375 — suggesting a price-to-earnings ratio of 45 times.
- Jefferies values Siemens India Energy at 62 times FY27 price-to-earnings ratio, placing it at a 13% discount to Hitachi Energy. Their implied price target stands at ₹3,743, indicating a potential 32% upside from the implied listing price.
The Bigger Picture
This demerger represents a significant strategic move in India’s capital goods and engineering sector. By separating its energy business, Siemens aims to create sharper focus and potentially accelerate growth in both entities. The parent company, Siemens AG, implemented a similar strategy globally in 2020, and the Indian subsidiary is now following suit.
What Should Investors Do?
For existing Siemens shareholders, this demerger presents an opportunity to hold stakes in two distinct businesses with different growth trajectories. New investors might consider waiting for the dust to settle and evaluating both entities based on their independent merits once Siemens Energy India lists separately.
Market analysts recommend keeping a close watch on both companies’ performance metrics in the coming quarters to better understand their independent growth strategies and execution capabilities.
Conclusion
The spectacular 20% surge in Siemens shares following the energy business spin-off underscores investors’ positive outlook on this strategic move. As both entities chart their independent courses in the coming months, the market will be watching closely to see if this demerger delivers the anticipated value creation for shareholders.
Have you been following the Siemens demerger? What’s your take on holding shares in both companies versus focusing on just one? Share your thoughts in the comments below!
