UPL shares stabilise as investors assess value from restructuring plan

After sliding nearly 15% following the announcement, UPL's stock has since stabilised despite broader market volatility

Shares of agrochemical major UPL Limited have stabilised in recent weeks despite a broader market selloff, as investors reassess the potential value creation from the agrochemicals major’s sweeping restructuring plan.

 

The stock had fallen nearly 15 per cent on February 23 after the company announced a proposal to spin off and consolidate its crop protection operations into a new entity that it described as the world’s second-largest listed pure-play crop protection platform. Since then, however, the shares have slipped only about 2.5 per cent even as the benchmark Nifty 50 index has corrected roughly 8 per cent over the same period amid risk-off sentiment triggered by tensions in West Asia.

 

 

The relative outperformance, experts say, could be an indication that stakeholders are gradually gaining comfort with the contours of the group’s reorganisation and its implications for leverage and shareholder value.

 

Management said the company has actively engaged with investors and lenders following the announcement to clarify concerns around leverage and value distribution.

 

“We met a number of key shareholders, debt holders and rating agencies, and the subsequent feedback has been constructive and supportive,” said Toshan Tamhane, global chief operating officer at UPL. “Importantly, the rating agencies reaffirmed their outlook, which reflects their understanding that there is no value leakage in this restructuring.”

 

Under the plan, UPL will combine its India crop protection business and its global crop protection platform to create a new entity — UPL Global — which will eventually be listed in India. The transaction, structured as a three-step scheme of arrangement, will ultimately result in three listed entities: UPL Ltd, the seeds business Advanta Enterprises, and the newly formed UPL Global.

 

According to Tamhane, concerns about leverage appear overstated as the company’s balance sheet has already improved significantly. “UPL Global was once leveraged at close to 11 times. That came down to around 3.7–3.8 times last year, and by the time the listing happens, it should be around 2–2.3 times,” he told Business Standard.

 

He said UPL Ltd’s net debt-to-Ebitda ratio has already declined to 2.1 times in FY25 from 4.6 times in FY24 and is expected to improve further to 1.6–1.8 times by FY26, with a longer-term target of below 1.5 times. The company has been stepping up deleveraging efforts. In 2025, it repaid $250 million of debt ahead of schedule and redeemed about $400 million of perpetual securities using internal cash flows and proceeds from a rights issue.

 

Rating agencies including S&P Global Ratings, Moody's Investors Service and Fitch Ratings have reaffirmed their ratings on the company following the restructuring announcement, citing improving operational flexibility and stable credit quality.

 

HSBC said the restructuring is aimed at simplifying the group structure and improving value discovery across business platforms. The brokerage estimates the enterprise value of UPL Global at around $8 billion. The brokerage house maintains a “buy” rating on UPL Ltd stock with a target price of Rs 925, implying potential upside despite possible holding company discounts.

 

Shares of UPL currently trade at about Rs 630, which values the firm at a little over Rs 53,000 crore ($5.7 billion).

 

Following the reorganisation, the listed UPL Ltd entity will house the specialty chemicals business, manufacturing base and smaller ventures, which clocked revenue of around Rs 10,000 crore and earnings before interest, tax, depreciation and amortisation (EBITDA) of around Rs 1,100 crore in FY25. The parent will also retain majority stakes in both Advanta and UPL Global, while incubating new businesses in areas such as bio-ethanol, sustainable aviation fuel, e-methanol and green chemicals.

 

UPL said the restructuring aims to eliminate the “conglomerate discount” that often affects diversified groups.