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Based on studies that show de-merged entities perform better on the stock market than unmerged entity, Unifi Capital has launched an ‘India spin-off fund'.
The Chennai-based portfolio management company intends to raise Rs 200 crore in three months to invest in companies that are restructuring. About 15 de-merger deals are open.
At a press conference here, Mr K. Sarath Reddy, founder and CEO, Unifi Capital, said that investment theme is borne out by studies all over the world. Unifi's research, he said, evaluated Indian spin-offs between 2005 and 2010; and it was observed that the stocks returned 45 per cent within 15 months of the demerger. The studies show that the parent performs better after the de-merger than the ‘child' company, because often the child company is spun-off to help the parent get rid of baggage.
The child company returns negative soon after the de-merger. However, a year after the de-merger, the child too gives positive returns.
The fund will split investments in the parent and child companies in 3:1 ratio.
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