Shares of Siemens tanked 5 percent in the last hour of trade on May 19 and is trading 9 percent lower at 10am on May 22. This comes after an announcement by the company to sell and transfer its low voltage motors and geared motors businesses to Siemens Large Drives India, a subsidiary of Siemens AG. This is with effect from 1st October, 2023 for a cash consideration of Rs 2,200 crore.

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The low voltage motors and geared motors business contributed 7 percent of Siemens revenue or Rs 1,061 crore in the year ended September 2022. Siemens follows a financial year of October to September.

The Board has also decided to consider the distribution of 100 percent of the sale consideration (after applicable Capital Gains Tax, and any other applicable taxes, if any), as a special dividend, at the first Board Meeting after completion of the proposed transaction.

The rationale for sale is that Siemens AG intends to carve out the low voltage motors and geared motors business globally into a legally separate company and is based on Siemens AG’s decision to form Innomotics, an integrated provider of motors and large drives.

Siemens stock tanked 5 percent in the last hour of trade on May 19 and is trading 9 percent lower at 10am on May 22.

Philip Capital says the sale of company's India business to parent in the past as well has been a regular occurrence. This deal seems to have a negative impact for Siemens, as it is valued at 16.7x, while Siemens TTM P/E is 84.8x. Philip Capital has a 'Buy' rating with a target price of Rs 4,328.

Brokerage Prabhudas Lilladher says the sale of low voltage motors and geared motors business will lead to readjustments in revenue and profit after tax. The brokerage has 'Accumulate' rating on stock with target price of Rs 4,254.

Nomura has downgraded the stock to 'Reduce' from 'Neutral' citing concerns on fairness of valuation for the business being sold to the parent company. Nuvama says the deal puts minority shareholders at a disadvantage given that the sale is to parent entity.

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Alongside, in an another development, Siemens, on May 19 said in a press release said that it entered into agreements for the acquisition of Electric Vehicle division of Mass-Tech Controls Private Limited.

With the acquisition, Siemens looks at addressing the fast-growing demand for electric vehicles charging infrastructure in India, expand local market presence and enable creation of export hub. Mass-Tech Controls will also help Siemens scale up the range of e-mobility solutions.

The acquisition of the electric vehicle division is in cash and is likely to be completed by September 2023. The cost of acquisition is Rs 38 crore.

Mass-Tech Controls was incorporated in the year 1988 and its EV division was started in the year 2017. The EV division is engaged in the business of design, engineering, and manufacturing of a wide range of AC and 30 – 300kW capacity DC chargers for various end applications for electric vehicles. Mass-Tech Controls is headquartered in Mumbai and its sales are within India. The turnover of Mass-Tech Controls electric vehicle division tripled in FY23 to Rs 16.7 crore from Rs 5.7 crore in FY22, while in FY22 the revenues stood at Rs 1.8 crore.

First Published:May 19, 2023 3:38 PM IST