Forbes Precision Tools and Machine Parts Set to List on June 11

Introduction

Forbes & Company Limited (FCL) had approved a Scheme of Arrangement to demerge its Precision Tools business into a wholly-owned subsidiary, Forbes Precision Tools and Machine Parts Limited (FPTL). This move aims to streamline operations, enhance management focus, and unlock shareholder value.

Details of the Demerger

1. Entities Involved

Demerged Company: Forbes & Company Limited (FCL)

Resulting Company: Forbes Precision Tools and Machine Parts Limited (FPTL)

2. Division to be Demerged

The Precision Tools business of FCL, which includes manufacturing and trading of cutting tools, HSS taps, drills, threading tools, and other precision tools.

3. Turnover of the Demerged Division

For the financial year ending March 31, 2022, the Precision Tools business had a turnover of Rs 179.22 Crores, representing 76.25% of FCL’s total turnover.

4. Rationale for the Demerger

• Distinct Business Focus: Precision Tools business has unique risks, opportunities, and business methods compared to the remaining businesses of FCL.
• Growth Potential: Each business unit within FCL has significant growth potential and can attract different investors and strategic partners.
• Specialization and Efficiency: Segregation allows for greater focus, specialization, and efficient management, enhancing the growth prospects of each business.
• Value Creation: The demerger will help unlock value for shareholders by listing FPTL separately, allowing investors to focus on distinct business segments and enabling better capital allocation.
• Independent Growth Strategies: Both FCL and FPTL can pursue independent growth strategies, enhancing flexibility in accessing capital and fostering collaboration and expansion.

5. Shareholding Pattern

FCL’s shareholding pattern will remain unchanged post-demerger.

FPTL will issue shares to FCL’s shareholders in a 4:1 ratio (4 shares of FPTL for every 1 share of FCL). The shares held by FCL in FPTL will be canceled, mirroring FCL’s shareholding pattern in FPTL.

6. Listing of Resulting Entity

The new shares of FPTL will list on June 11 on BSE, where FCL’s shares are currently listed.

Benefits of the Demerger

• Sector-Focused Company: Creation of a focused entity for Precision Tools.
• Value Unlocking: Listing of FPTL’s shares will unlock value for FCL’s shareholders.
• Independent Management: Separate management structures will allow FCL and FPTL to implement tailored growth strategies.
• Attracting Right Investors: Each entity can attract investors suitable for their risk-return profile.
• Enhanced Capital Allocation: Independent capital allocation will cater to the specific needs of each business segment.
• Stakeholder Interests: The demerger aligns with the interests of shareholders, creditors, lenders, and other stakeholders.

Conclusion

The demerger of Forbes & Company Limited’s Precision Tools business into Forbes Precision Tools and Machine Parts Limited is a strategic move designed to enhance focus, streamline operations, and unlock value for shareholders. This step will allow both entities to pursue growth opportunities independently and more efficiently, ultimately benefiting all stakeholders involved.

Disclaimer: This post has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.