Shankara Building Products shareholders will get one share of Shankara BuildPro for each share held in parent company, the company informed the stock exchanges.
Shares of Shankara Building Products Ltd. (SBPL) surged as much as 12% on Tuesday after the company’s board approved the demerger of its trading business into a new wholly-owned subsidiary for unlocking shareholder value.
The board of directors of the company on Monday approved the demerger of its trading business into a new company, Shankara BuildPro Ltd.
This demerger will result in two separate entities focused on building materials marketplace and manufacturing, respectively, the company said in a filing to the stock exchanges.
SBPL has two business segments including building materials marketplace, which is the engaged in trading, distribution and retail, along with the manufacturing vertical.
Shankara Building Products shareholders will get one share of Shankara BuildPro for each share held in parent company, the company informed the stock exchanges.
After the completion of the demerger, the shares of Shankara BuildPro will be listed on the NSE and BSE.
The demerger is aimed at creating a dedicated vertical for growth, unlocking significant value for shareholders and attracting a new set of investors, the company said.
According to a company presentation, the Building Materials Marketplace segment reported revenues of ₹3,263 crore in financial year 2023, while the traditional manufacturing vertical posted revenue of ₹767 crore.
The return on capital employed (ROCE) in the trading business ranged between 27% and 28%, while for the manufacturing segment it was between 4%-5% in financial year 2023. Lower profitability and high capital employed in manufacturing business has dragged the key performance metrics of the overall business, the company noted.
Shares of Shankara Building Products are trading 8.1% higher at 767.65. The stock recently turned positive for 2023 and is now up 15% so far this year.