Crompton Greaves plans to demerge its Consumer Products biz; shares rally

NEW DELHI: Crompton Greaves Ltd rallied as much as 16.59 per cent in intraday trade on Thursday, after the company's Board proposed to demerge its Consumer Products business unit into a separate listed Company.

"The Board believes that such a demerger will create better growth opportunities for its two large but significantly different businesses which are Power, Industrial and Automation which is a B2B business, and the Consumer Products business which is B2C," Crompton Greaves said in filing with the BSE.

"The Board also believes that this will create a more flexible capital structure for the two businesses to grow independently, allow them to pursue more ambitious strategic goals and, thus, create further value for existing shareholders," added the note.

Gautam Trivedi of Religare Capital Markets said that Crompton Greaves is one of their top picks and they have a target price of Rs 235 on the stock.

Misal Singh, Infra Analyst, Religare said that this move was warranted essentially because the stock was undervalued in our opinion so this was trigger for the move to happen and it is a step in the right direction so it acted as a positive trigger for undervalued stock.

"In terms of clients, we are advising clients to continue to add positions in the stock because we believe Rs 235 to Rs 250 is more like a fair value," he said.