Saregama Demerger: What It Means For Shareholders?

Saregama‘s share price was trading lower on Friday, the stock slumped close to 3% to hit an intraday low of ₹399.

What Happened: Earlier in the year, the company had announced the demerger of its e-commerce business into a separate entity. The record date for the spinoff was July 27. The demerger will see shareholders being allotted one share of the demerged entity for every five shares of Saregama.

The e-commerce spinoff Digidrive Distributors Limited would also be listed on the BSE and the NSE and will no longer be a subsidiary of the company. In a note on the demerger, analysts at ICICI Securities said that the demerged division’s revenue amounted to ₹17.4 crore in FY21.

The firm further added that the demerger only involves the digital distribution arm, and the Carvaan business remains with the residual entity, Saregama. The brokerage firm further said that the distribution arm enjoys non-exclusive rights to selling Carvaan on the e-commerce platform, which is expected to continue.

The demerger of the non-core activity, particularly the publication segment, is seen as a significant positive by the brokerage firm. It is likely to enable the management to adopt a more focused approach towards the core music business, the firm added.

Commenting on the demerger Kranthi Bathini, Equity Strategist at WealthMills Securities told Benzinga India that the majority of Saregama’s revenue comes from the content business. He further added that the demerger is for the purpose of value unlocking and would benefit the shareholders. As per Baithini, the demerged company will have a better valuation as a separate entity.

Price Action: Saregama’s share price was down 1.91% to trade at ₹403.45 in the mid-market hours of trading on Friday.

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