MOSL: CESC (Buy)-CESC to go ahead with part demerger-Demerger to unlock value
CESC: CESC to go ahead with part demerger; Demerger to unlock value; Buy
(CESC IN, Mkt Cap USD1.6b, CMP INR886, TP INR1077, 22% Upside, Buy)
CESC to go ahead with part demerger; record date is 31st October 2018
- CESC’s board of directors has decided to go ahead with the demerger but with some modification. Instead of demerging the power business into generation and distribution, it will be keeping it as a single entity.
- Thus, the demerger will be into three instead of four businesses: power, retail and others (other ventures).
- CESC had all approvals, except from the electricity regulator for a power purchase agreement between to-be demerged power generation and distribution businesses.
- The process is taking time, and thus, the board took a decision to go ahead with a part demerger. It will continue to actively seek the PPA and eventually demerge the power generation and distribution businesses.
- It will remain a mirror demerger, replicating the shareholding pattern of the current listed entity. The record date is 31st October 2018.
- CESC will remain listed and house the power business. The retail and other ventures are likely to get listed before mid-December 2018.
CESC is engaged in the business of generation and distribution of electricity within the licensed area of 567 sq. km in the city of Kolkata and adjoining areas and does not operate in any other reportable segment. The peak power demand in the licence area is now approximately 1,460 MW, which is met through CESC's internal generation capacities as well as through power purchased from the state and national grid. Power demand, however, fluctuates based on seasonality and the time of the day; the maximum demand for power is usually during the evening hours, with less power needs during rest of the day. The combined generating capacity of Co.'s four plants is 975 MW.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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