Shares of Saregama India closed in the upper circle of 5 per cent at Rs 4,828.45 on BSE in day trade Thursday after the board of directors agreed to separate the entire distribution business of the company. The separation process relates to the sale of all of its physical products including Carvaan in the digital markets along with the identified non-core assets (i.e. investment in the publishing business). The stock had reached a record high of Rs 5,487 on December 28, 2021.
The online market has great potential, and the skills acquired by the spin-off company in the recent past can be used to manage the mass distribution business, with the potential to add more products. Saregama India in its rationale for the demerger said that this will also benefit the business of the detached company, as the bargaining power generated by distributors by selling a range of products will help in accelerating carvaan sales as well.
The separate company intends to integrate its e-commerce distribution business into the resulting company, which, among other things, will unlock the value of each business for the separate company’s shareholders, attract investors and provide better flexibility in access to capital, the company said.
Two fully paid shares of the resulting company’s equity, marked as fully paid, for each one share of the separate company’s stock.
“The split line was Rs 17.4 crore in FY21 while the bottom line is (in our view) negligible and therefore has no significant impact on earnings. We highlight that the split includes only the digital distribution arm (including publishing) and that Carvaan’s business remains With the remaining Saregama entity. Separation of non-core business, especially publishing, is a major positive factor potentially driving a focused approach to management on the core business of music,” ICCI Securities said in a note.
Meanwhile, on February 24, 2022, the Board of Directors of Saregama India approved a share split of Rs 10 to Rs 1 each. The company said that the subdivision of the nominal value of the shares of shares to improve the liquidity of the company’s shares in the stock market and make it accessible to small individual shareholders as well as to expand the base of small individual shareholders.