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SKF India - Company to demerge automotive and industrial businesses
SKF India's board has approved the demerger of its automotive and industrial businesses. The decision of automotive business separation at a global level was announced last month by its parent company AB SKF. The required disclosures will be notified to the exchanges once they finalize the detailed scheme of arrangement. As of now, the company has incorporated a new wholly-owned subsidiary - SKF India (Industrial) Ltd for the industrial business
On consolidated basis, numbers will remain same but there is a possibility of separate listing of industrial business in future. SKF India’s total revenue stood at Rs 4570 crore in FY24, of which industrial segment contributed ~51% while automotive segment & exports contributed ~40% & ~9% respectively
This development looks largely neutral for SKF India as the margins in automotive segment are relatively better led by high localization of ~90% (vs 40-45% in industrial segment). However, growth has been better in industrial segment (led by strong double-digit growth in railways, heavy industries & metals)
Going ahead, company targets to increase localization in the industrial segments to 60% over the next few years (from 40-45% at present), which will help the company in securing more orders and margin improvement
We also believe that, there can be some value unlocking also in SKF India post demerger considering that industrial businesses generally command better valuations
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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