Demergers on the radar

Spinoff type situation

Optiemus Infracom a company with a market cap of 1800 cr is set to get total revenue of 38000 cr in next 3-5 years because of the strategic partnership with Winstron.
The stock has been in upper circuit since last 9-10 days.
Looks very Interesting.

Disc: Tracking, Not Invested yet


there’s ang life sciences also, really wanted to buy that but the lot is big and it needed a large investment. cld hv made quite a bit thre simply trading it even b4 the move happnd

capital reduction 4 3i capital also

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Now Havells is also in the race to buy eureka Forbes


Godawari Power & Ispat is considering Bonus or Split of Face Value of 10 on 14th September 2021.

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Recently i came across JHS Svendgaard they were planning to demerge some of their business for better management focus. Company is quite small and i personally i am not sure if demerger can happen in foreseeable future as it has been quite some time last update was given on it.

Some Key characteristics:
The entities that are to participate in the business are all part of the JHS group of companies and the transaction is essentially a restructuring of the company to separate their retail business for better and swift management. The parties to the transaction are defined below:

  1. JHS Svendgaard Laboratories Limited (Transferee Company/ Demerged Company)- JHS Svendgaard Laboratories Limited also known as JSLL or henceforth the Transferee Company is engaged in the business of production and selling of oral care products like mouthwash, toothbrushes, toothpaste, and denture tablets among other things. The transferee company is also engaged in offering contract manufacturing partnerships for both national and international markets.
  2. JHS Svendgaard Retail Ventures Private Limited (Resulting Company)- The resulting Company thus formed is tasked with carrying out the sale of the entire range of Patanjali Products, especially at all major airports of the country.
  3. JHS Svendgaard Brands Limited (Transferor Company)- This brand continues to do business by the sale of oral products and under the label of ‘aquawhite’.

Segmental Results:

Scrip is quite illiquid and with reference to sales it seems to have quite less profitability for example last year they did sales of 97Cr from manufacturing business with PBT of only 3 Cr. Concall are not available i think to get more clarity on business and future trajectory. I personally don’t find strong triggers just tracking it once in a while.

Please refer following article for clarity on structure and objectives of business:

Disc: Not a Investment advise please do your own due diligence & not SEBI registered advisor and not invested in last 90 days.


It’s official now.


The news on this has been in circulation for months now, and the stock has more than doubled over past 6 months in anticipation of a deal.

Has anyone analysed this special situation opportunity in depth? A cursory glance at the financials from screener and the latest annual report, makes it pretty clear that Eureka Forbes is really the meat of the Forbes Company business. Rest of the divisions - IT, construction, Engineering and Shipping do not have either the scale or the profitability. Plus the Balance sheet too is in bad shape.

Advent has had good record record with their past acquisitions - Crompton, DFM Foods, so the odds of them making a success out of Eureka Forbes are pretty good.

Other than the risk of regulatory disapproval, or the deal falling off…What are the trade-offs of entering now vs entering directly into Eureka Forbes when it lists separately? If someone has already looked at this, would be very helpful, to get their views.

Ur questions pretty much contained the answers u were seeking… :stuck_out_tongue:

The arbitrage analysis always start with the question - Where is the bet ? - Forbes co. minus the Eureka part, will still be a struggling enterprise. The proceeds from the deal will be for paring the debt & even after that the drag businesses will remain. Thus, very little scope for re-rating. If u wanna consider a comparative case here consider Hinduja Global that have recently sold thr healthcare vertical for 7k+ crs.

The other part - Eureka Forbes which will be sold - Everyone knows that its a great business & thus it is valued accordingly. Advent may have overpaid a bit too bcoz of thr control premium. So, with listing itself, the gains will be capped. You cab try valuation of the business & see how mch u r paying for how mch of a growth scope.
A comparative case study that I’ll suggest here is of GHCL demerger, The co. is decently valued to begin with & the demerged textile biz part seems to be ob the recovery path

Disclosure :- Invested in GHCL. no investments in Hinduja Global.


I was confused whether to take a position in a demerger special situation before/after the listing. My thesis reg. this so far is as follows. Please correct me if I am wrong.
If there is significant institutional shareholding(esp. domestic) in the parent, only then does the smaller demerger company come under selling pressure post listing, else it may not fall sharply (suven pharma, Aarti surfactants fell while meghmani did not). So ghcl should ideally be bought post listing(as it has 30%+ institutional holding of which 20% is dii) while Forbes should have been bought pre listing (as it has no dii holding).


Eureka Forbes valuation according to the deal is around 2x sales. How many consumer businesses trades at 2x sales? Aquaguard has more than 50% market share in water purifires and 70% market share in vaccum cleaners. It also has a good market share in air purifiers market. Symphony which has been struggling to grow their sales trades at 7x sales.

Advent, the new promoter of Eureka Forbes are very good at turning around and scaling business. See what they did to CG consumer after buying it in 2015. They exited CG consumer at 3x profits.

In my view, the promoter change will help in rerating Eureka Forbes and also scaling it and it will be overall positive for minority shareholders of Forbes and co.

Invested and may be biased.


not denying the consumer business at decent valuation theory. Bt in dat case, the narrative changes - thn this will nt fall under the demerger\risk arbitrage situation. If ur analysis hinges on this theory, thn the comparative set, risk analysis etc. everythng changes as a frame of reference.

The purpose of this thread is to uncover pure special situations whr the returns for a specific timeframe, typically 18-24 months can be mathematically calculated on an IRR basis. Hence, my example set was different from the ones u mentioned.

@Shawn_Lopes had put this thread specifically for that purpose & I connected with him to filter out situations based on these calculations. Risk arb as a branch of value investing requires different mindset & set of analysis tools vs. the more of buy-monitor & hold on type of investing. The initial price paid plays a lot more imp role here than the qualitative aspects u mentioned.

To further elaborate my point, let me give an e.g that’s migrated frm risk arb to buy & hold bcoz its a subjectively assessed stronger case. - Meghmani

The risk arbitrageur returns hinged only on calculating rough valuation of the 2 businesses, handicap the odds of demerger going thru & then buying at some discount to the perceived unlocked value. Basically, we bought Meghmani pre-demerger, & sold out whn both the businesses listed separately & reached some standard valuations, say 10X EBITDA.

The buy-&-hold thesis comes now for Meghmani Finechem - Ppl are valuing & paying for business growth, deleveraging, higher future volume growth expected etc. - The Arbitrageur left the table early, but thn his analysis didn’t covered this part to begin with.

Similarly, in this case the question is that how mch IRR will be generated in buying Forbes co. now & waiting till the period Eureka Forbes gets demerged & listed separately.That’s it!!!

If I have to invest in Eureka Forbes ( not Forbes Co. ) thn I’ll probably wait to get it listed, assess the business strength vis-a-vis valuation & my investment timeframe & thn probly buy it.


Could Agree more on @shardhr point of view special situations Arbitrage is nothing but finding one scrip and identifying a comparable scrip in listed space and see if there is significant valuation difference between two of them it will not focus much on fundamentals or any other quality that makes a company really great business to own in long run.
Personally in my experience there are some times some opportunity which are available which becomes long term play after entering them for arbitrage opportunity for recent example Meghmani Finchem, Tips or Forbes.
Main reason should be to have a thesis ready in mindset before buying any scrip for example if you are buying a scrip for just arbitrage play or to enter a scrip which you think is good for long term any by this process you can cut your cost down.
For Example: Buying GHCL for arbitrage play & then exit it or You don’t like to buy a business at 50 PE then special situations can help you buy Tips industries at 20PE and then let it run to rerated and mean while you can hold a high PE company at good margin of safety but most important is to know your reason for entering and not change in between just because scrip has rallied(Just like a good cyclical investor says “If you enter sugar for turnaround play then exit when turnaround happens don’t change in between and stay in them for Ethanol”).

One more important point i will like to point out in GHCL and Forbes is both of them have reached a in final stages of their special situations stage where whole market has clarity about at what date and at what price things are going to happen & hence their arbitrage play gap narrows down really fast. There is premium associated with these scrips if you enter earliest when risk-reward are that favorable.
Example GHCL was 200 when demerger started to get announced then there was large amount of valuation gap now that Gap has narrowed significantly hence it does not have enough IRR for me to enter But now if look at it they have recently announced to add 50% more capacity which will make it cheaper at todays valuation but now it is a growth story and management execution ability ,Soda Ash prices stability ,etc. now entering it as arbitrage opportunity does not make sense and Soda Ash business is out of my circle of competence, hence even if scrip price increase It should not matter to me as it never my bone to eat. For me it is equally important to enter in arbitrage opportunity when there is lack of clarity about event happening and get that premium of uncertainty (Risk-Reward understanding is very important here and this answer every investor can answer to themselves based on their portfolio construction). Aarti Industries is also a similar case where rich valuation and time has reduced arbitrage opportunity it to enter now.

My 2 cents Forbes & Co

Forbes in last 5 years from their main brand of water filter has made a loss as seen in above graph and historically has 1-2% Margins. Coming from Banking Background i have seen how difficult it is for new promoter to change the business and make it profitable and focused and trust me just because a group has history of turnaround companies it does not guarantee success in this case because each and every company has different set of people and different culture and other traditions which cause lot of problems in acquisition.(Study UTI and Axis Bank struggle in their initial phase).
Advent has solved this issue by using a basket approach for example they entered in crompton, DFM Foods and several other and hence even if one fails other cover up for it and it we enter just Forbes on their Brand name and if it fails to turn around our complete portfolio allocation will be affected while for them it will be small subset of portfolio. These are some risk i understand before entering any scrip to have Margin of safety. All things said there are several positive triggers to in this Harvell’s tried to compete and failed to penetrate , Forbes has a very unique approach to sell and manage and I have seen it (Its Local Team Based) that is why I think Havells found it difficult to break in these segment which shows it has Moat.

72.56% for 4400 Cr it puts valuation at roughly 6000 Cr, Now looking at earlier number it should be judged if it actually worth 6000 Crores for loss making or 2% margin business this should be answered by investor themselves. I think right valuation will be close to 4500-5000 Cr for it
Advent has paid 6000 Cr valuation for controlling stake in the firm its basically a premium for it
If we assume valuation at 5000 Cr for Main business what we are left with is other business of Forbes

Except Real estate all other division are loss making now questions is these a worth it business to have at what valuation should be buy it especially where the promoter has history mis capital allocation and since its conglomerate promoter is not going too much focus on these particular business as there are other business to look after. I will leave these question to be answered by investor themselves . From my perspective the way I see it is Forbes had wonderful risk premium associated with it 5-6 Months back now that gap is narrowed down, If I had tracked it it 6-7 months back I would have entered it for arbitrage opportunity on basket level that doesn’t mean there is no opportunity available in it there definitely is more value to unlock but for me I find other better opportunity available for Risk-Reward perspective. Even if Forbes water purifier business does really well from these point it should not affect me (I would prefer to average up Polycab my go to player for FMEG & Goods space where there is stability of promoter as Forbes is out of competence. I strongly believe capital is very scarce and it should be respected & hence should only be given to good long term players i truly resonate with and not distribute it with too many players)
@shivammitra has very fair point in his framework for entering in Forbes and why it should do well every investor should have these reasoning and efficiently allocate capital to business they really believe in and not just mis alloacte capital to any players. I hope these helps some investor in understanding thesis on arbitrage opportunity in market and make well informed business

Attaching GHCL Segmental Report if anyone needs it for reference:

Disclosure: I may or may not have holding in some of scrips mentioned above. please do you due diligence not a recommendation & not SEBI Register advisor.


@Shawn_Lopes Really liked your detailed explanation. Just to correct, 4400 crores is the enterprise valuation of Eureka Forbes according to the deal. The remaining business may be valued around 500-1000 crores as they have 700 crores worth of land in Mumbai.

As an investor, I am betting on the new management to scale Eureka Forbes. Its sales has been flat for 5-6 years. As you pointed out, turning a business that has single digits margin is not so easy. I completely agree with that. Since Eureka Forbes enjoys a majority market share in most of the categories they operate and all these categories like water purifier, vaccum cleaner and air purifier are under penetrated in India. Hence, I believe that growth will come along with the new management.


Here is a list of special situations I crowdsourced from Twitter. Some of these are already discussed here, while others may be new.


Thanks @shardhr and @Shawn_Lopes for sharing your valuable insights (and also your views on Forbes specifically), especially appreciate your point emphasising judicious allocation of scarce capital. Your point is right on the mark, that as an investor, we should be clear on our approach before one makes an entry in such special situations. Thanks for highlighting that.

Personally, my motive to approach demerger special situation opportunities is never from a price arbitrage perspective. My understating on this style of investing is non-existent, so I’ve never ventured there.

My philosophy is to buy, hold and track. In past, I’ve had decent outcomes on few occasions that I have invested in demerger Special Situations (Meghmani, Jubilant Life and couple more. Have also seen good returns in Suven, though I’ve held that for many years now, and my entry was years before the special situation came up). On each of these occasions, I’ve entered clearly with the buy and hold view, based on the analysis that the demerged businesses (or at least 1 part of it) is likely to deliver better returns going forward. So the motive is to hold longer term.

Hence, I am far more comfortable entering once there is a clarity on the demerger process, even though it may mean paying a slightly higher price at for entering late, compared to the time when the SS first announced itself. As long as there is enough conviction that the demerged business will grow well, its worth paying the premium, especially to eliminate uncertainty of demerger process.

On Eureka Forbes, the business has indeed delivered below par numbers. But I believe that has more to do with the management and inefficiencies within the organisation. The trend is common across all their businesses. If it weren’t for the land they own, even real-estate division may struggle.

Eureka Forbes as a brand has high recall, and despite the mediocre way it has been run, it still enjoys a great market share. So it has potential to grow in an underpenetrated product category, that is beyond doubt. Valuation wise, at roughly 4400 cr, 2x Sales, for a established consumer business, there is definitely potential still left on the table, especially in the hands of a new, professional, capable management.

Disclosure: Not invested, but tracking


Excellent work @Tar

Taking this forward : -
Thr are some in the list which are either completed, or are internal restructurings with not mch thr for shareholders e.g Maithan Alloys, Asian Hotels, Gateway Distriparks. If I’m missing out smthng, others can plz add.

Process-wise : - Publicly announced deals & some tentative timelines are the first steps to filter out special situations IMO.

2 additional ideas : -

  1. DISH TV : - The trigger here is Mgmt change as taken up by largest shareholder - YES Bank. If the coup goes thru, thn re-rating can happen & yield 2-3X returns atleast in next 12 months or so. Discussed in detail in its specific thread.

  2. Indus Tower : - This was more of a fallout in share price due to VI bankruptcy overhang. With govt package & VI survival ensured for sometime subsequent re-rating has happened. However, the co. is still undervalued relative to tower cos. valuation abroad & its stable yield.


One more is the merger of Kilpest India (agro-chemicals) and its molecular diagnostics subsidiary 3B Black Bio


Another addendum to this; The Raymond demerger is cancelled. The filing doc is posted on Raymond’s thread.