Siemens shareholders reject proposed sale of low-voltage biz, stock hits new high. What next?

According to a Jefferies India report, the proposed EV/sales was lower than the traded multiple of the India arm. EV is enterprise value. “Implied loss to shareholders was Rs189/share as the proposed sale value was at an EV/sales of 2.1 times versus company multiple of 8.4 times,” it said on 30 July.

In May, the company’s board of directors had authorized the sale and transfer of this businesses, along with related customer service operations, to Siemens Large Drives India. The deal was valued at ₹2,200 crore. This transaction was subject to necessary approvals by shareholders and regulatory authorities.

In a report dated 28 May, analysts at Nomura Financial Advisory and Securities (India) Pvt Ltd had said that they do not expect minority shareholders to approve the deal. “The deal implies price to sales of ~2x FY22 sales of Rs1060 crore versus around 7 times for overall Siemens. Further, LV motors Ebit margin at 12.5% is higher than comparable Digital Industries margin of around 10% for FY22. Thus, despite a fairness opinion by bankers and auditors, it appears to us the deal would be unattractive for minority shareholders,” said the Nomura report.

And now that shareholders have given a thumbs down to the proposal, what is next for Siemens? “Possible scenarios ahead among others include the parent offering higher value to the shareholders or the LV business itself in India being marginalised or the sale seeing some delay till some other solution is found,” said the Jefferies report. “Any adverse change to the construct of the India business will be a negative, while a materially higher price will be a positive,” it added.

Meanwhile, in this calendar year so far, the Siemens stock has rallied around 41%. The company’s diversified presence across industries through focus on electrification, digitization & automation products is a long-term positive and bodes well for the company’s earnings outlook.

 “Considering healthy public & private demand outlook and focus on cost efficiencies we expect revenue/profit after tax CAGR of 14.2%/ 25.8% between SY22-SY25E,” said a report by Prabhudas Lilladher dated 6 July. The company follows the October to September financial year.