Spinning Value

Can Sintex Industries’ decision to demerge its plastics business create more moolah for its shareholders?

Illustration by Kishore Das

Sintex Industries seems to have finally found a way out to counter investor pessimism. The company is demerging its textile business that accounts for the majority of its Rs.6,000 crore debt (net gearing: 1.03x). Under the scheme, shareholders of Sintex Industries will get one equity share of Sintex Plastics, as against one equity share held in Sintex Industries. Textile has been a major drag on its financials, depressing its return on equity to 11.5% and limiting valuation to 6x earnings, despite consumer-facing businesses like monolithic and prefab, which has a higher margin. (See: Poles apart)