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In a bid to strengthen balance sheet, loss-making Siemens Energy will sell 18 per cent stake in Siemens Ltd, India to Siemens AG for €2.1 billion.
The transaction will reduce Siemen’s Energy’s stake in the Indian unit to 6 per cent, while that of Siemens AG will rise to 69 per cent from 51 per cent, Siemens AG and Siemens Energy said in their statements.
As part of the restructuring, Siemens AG and Siemens Energy intend to propose to Siemens Ltd.’s board the demerger of its energy business into a separate listed entity. Post the demerger, certain procedures will be set in motion for Siemens Energy to acquire a majority stake in the demerged entity. The demerger is expected to complete by 2025.
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“This partial sale is a first step in the planned – and now accelerated – unbundling of Siemens Energy and Siemens AG in India,” the statement by Siemens Energy said.
‘No impact on operations’
It added that the sale will have no impact on Siemens Energy’s operations in India.
“These will continue to the same extent as before under a supplementary agreement. India remains a strategically important growth market for Siemens Energy, in which the company continues to invest. Nothing will change for Siemens Energy’s customers,” the statement added.
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The proposed acquisition is expected to simplify the corporate setup in one of the fastest growing and strategically important markets for the group.
In 2020, when Siemens Energy was established under a restructuring of the Siemens Group, the Indian subsidiary Siemens Ltd was not unbundled for administrative reasons. In FY22 (year-ending September) Siemens India’s energy business reported a revenue of ₹5,371 crore, contributing 32.6 per cent to total revenue.
Bolstering Siemens Energy
“Siemens AG has taken measures to support the stability of Siemens Energy AG and accelerate separation in India – in the best possible interests of all parties,” the statement by the parent said.
Siemens Energy reported a loss of €870 million in the fourth quarter of FY23 against a net income of €354 million year ago. This was mainly due to losses sustained by its wind turbine unit Siemens Gamesa, which is facing troubled times due to quality issues in the onshore business, increased product costs and ramp-up challenges in the offshore business. It is expected that this unit will break even in fiscal 2026.
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The disposal of part stake in Siemens Ltd is expected to improve its cash reserves for FY24.
Shares of Siemens India rose 4.4 per cent intraday before settling at 2.3 percent higher at ₹3,495.50. The stock has risen over 24 per cent in the last one year. The price being paid is a discount of 15 per cent on the 5-trading-days volume-weighted average price before the day of signing of the deal.
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