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Group chairman Sanjiv Goenka said power utility CESC is being split into four companies by way of 'mirror image' demerger for value unlocking and focused management on each of the verticals.
Elaborating further, he said the group's power distribution business will be under CESC Ltd, the power generation business will be housed in CESC Generation and the retail business Spencer's will be a separate company. All non-power and retail businesses including BPO company Firstsource, sports, FMCG and real estate will be under CESC Ventures. There will, however, be no holding company.
Goenka said, "The paid up capital of CESC Ltd is Rs 132 crore but it has been increased to Rs 198 crore by way of gift or similar to bonus but cannot be termed as bonus. Shareholders will get additional value worth Rs 66 crore when they get fresh shares of the four demerged entities."
For each 10 shares of CESC Ltd, a shareholder will get five shares of Rs 10 each in generation, distribution, two shares of CESC Ventures and six shares of Spencer's (face value of Rs 5 each). ICICI Securities and chartered accountants BSR & Associates LLP, and Walker Chandiok & Co. LLP, helped the group work out the proposed share allotment.
RP-Sanjiv Goenka group chairman said, "The idea was to ensure that each listed entity has its own focused business rather than having a conglomerate because all along we were told that having a conglomerate actually gives you a discount to the market."
"The other reason behind the demerger was to give an additional share to every shareholder. The business restructuring scheme aims to simplify the present corporate structure," he pointed out. All the four entities will be listed with stock exchanges and the effective date will be October 1. The restructuring scheme is, however, subject to regulatory approvals.
In the demerged entities, paid up capital of CESC Ltd (distribution) will be Rs 66 crore, CESC Generation will be Rs 66 crore, Spencer's Rs 40 crore and the entity for all other ventures will be Rs 26 crore.
CESC Ltd which will manage distribution business of the group has five distribution licenses serving 3.5 million customers. The company has one distribution licence in Kolkata and Howrah, three in Rajasthan and one in Greater Noida. Goenka said the group will focus more in distribution business than generation.
CESC Generation will be managing total generation of 2550 MW including thermal and renewables.
Goneka said Spencer's will expand aggressively in Uttar Pradesh, West Bengal and Andhra Pradesh by adding two lakh-three lakh square feet every year over the next few years. Presently, Spencer's manages 12 lakh square feet of retail space. He said the group, which has recently forayed into FMCG space with snacks, has acquired a company but declined to share the details.
Speaking about the debt distribution, Goenka said CESC Ltd’s debts are very low. Whatever debt has been taken for distribution will go to the distribution company and debt taken for generation will go to the generation company. Spencer’s is debt-free, he said.
Meanwhile, CESC Ltd's net profit for the fourth-quarter (Q4) ended March 31, 2017, at Rs 295 crore was up marginally over Rs 293 crore registered during the corresponding period last year.
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