Siemens Limited announced the sale and transfer of its healthcare undertaking for a consideration of Rs 3,050 crore to Siemens Healthcare, a subsidiary of Siemens AG on a slump sale basis.
"The transaction, as part of the global realignment of healthcare business to separately manage healthcare business, will enable Siemens to increase its focus and capital allocation to power generation, transmission and distribution, mobility, industrial automation and smart cities segments in India," Siemens India MD & CEO Sunil Mathur said.
He added that the deal will enable Siemens AG to further strengthen its focus on the healthcare segment by aligning it with its global strategy. The transaction subject to regulatory, statutory and shareholder approvals, is expected to close by July 1, 2016. Valuation for the same was undertaken by Deloitte Touche Tohmatsu India and KPMG India.
Of the Rs 3,050 crore consideration received by Siemens India, it will distribute half of it as dividend to its shareholders (75 per cent share held by parent company Siemens AG) after providing for necessary taxes such as capital gains and dividend distribution tax. The rest will be retained by the company to meet its capital expenditure.
Hiving-off of the healthcare business is part of its global strategy and the management expects it to be a win-win situation for the existing business of Siemens India and the healthcare business as well.
"Over 85 per cent of our healthcare revenues come from products imported from Siemens AG. Significant management focus, including investments will be needed in finding appropriate products and solutions to meet the growing demands in Indian market as there are limited synergies between the healthcare and other businesses of Siemens," Mathur in a call with investors. Further with increasing government spending, preference for locally manufactured products and healthcare revenues largely coming in from smaller cities, the management feels preference is towards value products where required higher content of localisation.
Also, with the demerger of healthcare business, operating margins of Siemens India's core power and industrials business is also set to improve. In the investor call, he mentioned that even as the healthcare business accounted for 13.6 revenues in FY15, its contribution to earnings before interest and tax (EBIT) was only 8.5 per cent while its EBIT margins were merely 4.7 per cent as against the company overall margins of 7 per cent. Going forward the company has indicated that it could focus on verticals such as metro trains, locomotives and high speed trains.
Citigroup India acted as the transaction advisor to Siemens in the transaction.