Saregama hits 5% upper circuit on board nod for distribution biz demerger

Shares of Saregama India were locked at the 5 per cent upper circuit at Rs 4,828.45 on the BSE in Thursday’s intra-day trade after the board approved demerger of entire distribution business of the company. The demerger relates to sale of all its physical products including Carvaan on digital marketplaces along with identified non-core assets (i.e. investment in publication business). The stock had hit a record high of Rs 5,487 on December 28, 2021.

Online marketplace has considerable potential, and skills acquired by the demerged company in the recent past can be utilized to manage end-to-end distribution activity, and with a potential to add many more products. This will also benefit the demerged company’s business, as the negotiation strength generated by the distributors by selling a suite of products will help accelerate carvaan sales too, Saregama India said in its rationale for demerger.

The demerged company intends to demerge its e-commerce distribution business into the resulting company which, inter alia, will result in the unlocking the value of each of the business for the shareholders of the demerged company, attracting investors and providing better flexibility in accessing capital, the company said.

Two fully paid up equity shares of the resulting company, credited as fully paid up, for every one equity share of the demerged company.

“Demerged division topline was Rs 17.4 crore in FY21 while bottomline (in our view) is miniscule, thus having no major implication on earnings. We highlight that demerger only involves digital distribution arm (including publication) and Carvaan business stays with Saregama residual entity. Demerger of non-core activity, especially publication, is a key positive likely to drive a focused approach of management on key business of music,” ICICI Securities said in a note.

Meanwhile, on February 24, 2022, Saregama India board had approved stock split from Rs 10 to Re 1 each. The sub-division of face value of equity shares to improve the liquidity of the company’s shares in the Stock market and to make it affordable to the small retail shareholders as also to broad base the small retail shareholders, the company had said.