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The demerger of Star Ferro & Cement Ltd (SFCL) has taken effect on the bourses on Thursday. From now, shares of SFCL will only represent the cement division, while the ferro alloys division has been demerged into Shyam Century Ferrous Ltd (resulting company).
The SFCL share closed on Thursday at ₹165.35 on the NSE.
The demerger ratio has been fixed at 1:1, entitling every equity shareholder of SFCL to receive one equity share of face value ₹1 each of Shyam Century Ferrous (SCFL).
The effective date for demerger is April 1, 2014. For this purpose, the ex-date and record date has been set at April 23 and 24, respectively.
Analysts bullish earlier, now Earlier, Star Ferro and Cement, part of Century Plyboards, was demerged and got listed on the bourses in 2013. This demerger improved the quality of Century Plyboard’s core business earnings and valuation, analysts had said then.
They are bullish on the current demerger, too. According to an analyst with a domestic brokerage, the spin-off will help the management concentrate more on the ‘lucrative’ cement business.
ICICI Securities believes the step taken by the management will enhance the wealth of shareholders and trigger value unlocking for both the cement as well as ferro alloys segments through better synergy, cost-effective fund-raising and better resource utilisation over the longer term.
“Given the company’s ability to generate over 2x Ebitda/tonne of its peer set and the capability to expand through internal accruals, we believe SFCL will trade at premium valuations despite being a mid-cap cement player. We have valued the cement business at ₹266 a share, and valued the ferro alloys segment at ₹9 a share,” ICICI Securities said. According to Centrum Broking, though the ferro alloy’s profitability has been volatile, it expects ferro silicon plant utilisation to improve during FY16-17E as demand recovers.
“We estimate SFCL’s current leadership of delivering more than 2x industry average Ebitda per million tonne to sustain on account of its premium brand positioning in lucrative market, longevity of its tax exemptions/ incentives, and strong balance sheet to fund future growth,” it said.
Meanwhile, BSE and NSE said Star Ferro will be transferred to the rolling segment from e trade-for-trade segment from May 8.
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