CESC LTD Demerger


(Mute Spectator.) #1

How many of you see value unlocking in this special situation ?
The restructuring scheme includes amalgamation of CESC Infrastructure, Spencers Retail and Music World Retail with CESC; demerger of power generation undertaking to Haldia Energy; demerger of retail undertaking I (as defined in the scheme) of the company and retail undertaking 2 (as defined in the scheme) of Spencers Retail to RP-SG Retail. Further, the scheme includes demerger of IT undertaking of the company to RP-SG Business Process Services.
As per the scheme, Spen Liq will be amalgamated with RP-SG Business Process Services and New Rising Promoters will be amalgamated with Crescent Power.
The scheme includes reduction and cancellation of the existing share capital of Haldia Energy, RP-SG Retail and RP-SG Business Process Services. Further, it includes reduction of the face value of the equity share of CESC from Rs 10 per share to Rs 5 per share and subsequent consolidation of two equity shares of the company of Rs 5 each into one equity share of Rs 10 each.
The equity shares of Haldia Energy, RP-SG Retail and RP-SG Business Process Services will be listed on Calcutta Stock Exchange, BSE, and National Stock Exchange of India, post effectiveness of the scheme. The shareholders of the company will get shares in these listed companies in the same proportion as their holding in the company.
Post restructuring, in addition to the IT undertaking, the RP-SG Business Process Services will house various other ventures of the group, inter alia, property, entertainment and fast moving consumer goods business. As part of this alignment investments in/by Guiltfree Industries and Apricot Foods will also be held by RP-SG Business Process Services.


(sko5prasad) #2

It’s indeed a very complex arrangement of proposed demerger and will needs regulatory approval before it goes through. Any timelines management has given to complete this?

CESC_Q4FY17_Result_Update.pdf (657.4 KB)
Attached analyst report may help to understand it further down to details with corresponding numbers of each of the businesses involved in the demerger process.


(s) #3

It is fully valued at 910 for de merger.


(ramanhp) #4

Hello @s11, Do you have breakdown of the valuation.


(s) #5

CESC (ongoing business) Rs 528
Net Cash & Liquid Investments Rs13
Dhariwal 32
Haldia Rs 105
Firstsource Rs 86
Mall Rs10
Spencers Rs 137


(Abhishek Basumallick) #6

My ballpark numbers for the CESC demerger are as follows:

CESC (existing power business) - 12,500 - 16,500 cr. FY 17 PAT of 750 cr x 10% growth assumed for FY18 x 15-20 PE. The distribution company can actually be re-rated at more than 20PE as it is the only listed discom. The genco may be at the 12-15 PE range.

Spencers - 3300 cr. (2200 cr - 4400cr) FY 17 is 2000 cr x 10% growth x 1.5x Price/Sales (1-2x P/S)

CESC Ventures - 1000 cr. 55% of FSL marketcap of 2300 cr is about 1250 cr. Holding co discount of 30% would give about 900 cr. Add another 100 crs for other businesses liek Quest Mall, Real Estate etc

FY18E market cap for me is around 18,000. Current market cap is 13,000 cr.

Disclaimer: I may be wrong and my calculations. I have a vested interest in CESC. I am currently invested.


(paraa) #7

I agree with your figures however i feel the Spencer valuation at 3300 Crores is a bit on the higher side as Future retail growing at 12% is valued at around 1.2 P/S but if they improve their negative margins and bring it to positive territory,it will be justified


(mntolia) #8

Spencer’s retail is going to be debt free after the demerger.


(Suneel) #9

Can anyone please tell the exact record date for the demerger?


(Abhishek Basumallick) #10

It has not yet been announced. We will have to wait for official announcement from the company.


(Suneel) #11

ok. Thanks for that. 01-Oct-17 was supposed to be arrangement date subject to some approval.