HEG Limited Announces Strategic Demerger and Merger to Enhance Shareholder Value

HEG Limited, a leading electrical equipment manufacturer, announced a significant development to maximise shareholder value. Through a recent stock exchange filing, HEG unveiled a Composite Scheme of Arrangement involving a demerger and subsequent merger.

Demerger of Graphite Business and a New Merger

The proposed scheme entails the demerger of HEG’s graphite business into a newly incorporated company. Following this demerger, Bhilwara Energy Limited will be merged into HEG Limited. The entire transaction is subject to obtaining necessary regulatory approvals and completing compliance procedures.

Rationale and Considerations

The Board of Directors at HEG meticulously evaluated the proposal, adhering to the guidelines outlined in the Companies Act 2013 and relevant Securities and Exchange Board of India (SEBI) regulations. Independent valuation and fairness opinions from a merchant banker were obtained to determine the following share exchange ratios for the proposed scheme:

Demerger

Shareholders of HEG Limited will receive one (1) fully paid-up equity share of ₹10 each in the resulting graphite business company for every one (1) equity share of ₹10 each held in HEG Limited.

Merger

Bhilwara Energy Limited shareholders will receive eight (8) fully paid-up equity shares of ₹10 each in the merged HEG Limited for every thirty-five (35) equity shares of ₹10 each held in Bhilwara Energy Limited.

Unlocking Shareholder Value and Enhancing Efficiency:

This strategic move offers several compelling benefits for HEG’s shareholders:

• Increased Investment Flexibility: By separating businesses with distinct risk-return profiles, the scheme allows shareholders to tailor their investments to their individual risk tolerance and investment strategies. This effectively reduces the overall risk associated with the graphite business.

• Unlocking Growth Potential: Separating the GreenTech businesses allows these future-oriented segments to establish independent brand identities and potentially unlock new growth opportunities. Existing HEG shareholders will own shares in both the resulting companies, enabling them to participate in the future success of both entities.

• Improved Operational Efficiency: The proposed scheme streamlines the corporate structure by consolidating entities. This simplification reduces administrative costs and legal and regulatory burdens and enhances overall operational efficiency.

“The existing company and the New Company will script new paths as two independent, publicly listed companies. The underlying growth drivers, risk profile and capital allocation requirements are fundamentally different in the Graphite business compared to the green energy business. The Scheme will enable both companies to pursue their strategies and have focused management. This will enable the full value of each of the businesses to be unlocked for the benefit of the shareholders,” said Mr Ravi Jhunjhunwala, Chairman and Managing Director, CEO, HEG Limited.

Disclaimer: This blog 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.