Sterlite Power Transmission Demerger Explained: How Will It Affect Investors?


India is emerging as one of the most promising nations in terms of energy production. Indian companies are spending billions of dollars on R&D and infrastructure development. One such company is Sterlite Power Transmission Limited. Founded by Anil Agarwal, Sterlite is one of the major energy production companies in India. However, lately, the company has been suffering from a multitude of problems. Due to this, the company decided to demerge from one of its businesses, the Solutions business. Today we will go through the details of this demerger and the impact it will have on investors.

About Sterlite Power Transmission Ltd

Sterlite is a power-transmission infrastructure development company. It is a multinational infrastructure development company that has already established and ongoing projects in India and Brazil. It also has a solutions division that provides solutions for business-related challenges. The company also exports power conductors to companies from over 40 countries. They deploy the latest bleeding-edge technology to adhere to people struggling with power delivery challenges. Mostly, Sterlite is an optical fibre cable manufacturer.

Reason Behind Sterlite Transmission Private Limited Demerger

Due to financial troubles, Sterlite Power Transmission has been a part of some major mergers and demergers. For the last 7 to 8 years, Sterlite has been bouncing around like a foster child. However, now the company has found a stable foot and is looking to raise some funds for future endeavours.

The company is going through a demerger of its Solution business which involves the potential listing of the company in domestic stock markets while raising some money in the process. According to reports, Sterlite will be divided into two parts, the first one is the solutions business, while the second one is the infrastructure development business. Sterlite will transfer 4 assets worth $772.60 million to its Solution business.

Now, the main reason why the demerger was done is because GIC, a Singaporean sovereign wealth fund is investing $500 million in Sterlite and will buy a 49% stake in the company giving it enough funding for future endeavours.

The announced investment will come to Sterlite in tranches, with an initial payment of $100 million, while the remaining $400 million will come in the next four years.

According to various reports, GIC is planning to be the sole partner of Sterlife in India. Annually, Sterlite gets projects worth ₹10,000 crore to  ₹12,000 crore which accounts for 31.5 % market share. GIC  plans to further increase this market share and to do so, GIC is planning to invest more money in the company.

Sterlite Power Transmission Limited has been in money trouble for a long time now, because of this, they filed a DRHP in SEBI for an IPO but didn’t press forward because of unfavourable market conditions. Altogether, Sterlite Power Transmission is hoping to raise somewhere in the ballpark of $1 billion.

Sterlite Power Transmission Unlisted Shares

As we mentioned above, Starlite is not a public company. It trades its shares in the unlisted share market. Currently, Sterlite Power Transmission Limited share price value is around ₹600. It is the highest price for Sterlite unlisted shares since last year. Currently, Sterlite has 12 crore outstanding shares, which gives the company a valuation of ₹7,200 crore. Now, this demerger can also add value to Sterlite Power Transmission share prices due to the investment secured by the company. If the demerged solution business gets a good valuation, that can also affect Sterlite share prices for good.

On top of that, this demerger couldn’t have come at a better time. As we all know the Indian government is looking towards generating more energy for residential and industrial purposes. It’s estimated that the Indian government can offer contracts up to ₹ 1.5 lakh crore. In this time of need, these projects can help the company a lot.

Should You Consider Buying Sterlite Power Transmission Unlisted Shares?

Whenever buying any unlisted shares, it is wise to first go through the financial metrics of the company to make an informed decision.  The last few years haven’t been good for Sterlite Power Transmission Limited, but recently the company has bounced back. This seems to be a good time to invest in Sterlite Power Transmission Limited because of the latest developments.

Before buying the shares, make sure to go through the company’s financial metrics for thorough research. If you have trouble finding financial metrics like EBITDA, PAT and Revenue then don’t worry, Stockify will help you.

Stockify is a trusted online trading platform which provides you with all the necessary financial metrics like  EBITDA, PAT and Revenue and also provides a safe, secure and easy-to-understand platform to trade your unlisted shares with little to no problems. So if you’re interested in buying unlisted shares, visit Stockify today.

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