Siemens AG to buy 18% stake in Indian joint venture for $2.28 billion

In a proposed restructuring of equity holding, an 18 per cent stake in India-listed Siemens is likely to change hands between promoter companies — Siemens AG and Siemens Energy — with the former to pay the latter €2.1 billion ($2.28 billion) for the stake.

Part of the agreement includes a proposal to demerge the energy division of the Indian arm into a separate listed entity

The transfer of cash is expected to bring partial relief to the energy entity, which is facing losses in its wind turbine business. The deal, Siemens AG said, has been agreed at a discount of 15 per cent on the five trading days’ volume-weighted average price before the day of signing the agreement.

 

In a response to Business Standard, the Indian entity said its board would consider the two proposals— the stake sale and demerger.

Once the demerged entity is listed, Siemens Energy is to ultimately acquire a controlling stake in it.

“The aim is to complete the demerger in 2025 — significantly earlier than previously planned,” Siemens AG said.

“Together, we shaped a solution that is in the best possible interests of all parties and accelerates the separation of Siemens and Siemens Energy in India,” said Roland Busch, president and chief executive officer, Siemens AG.

“Besides the immediate cash inflow, we are also enabling an additional line for customer guarantees, making a strong overall contribution to the future stability and growth of Siemens Energy.”

For the June 2023 quarter (Q1FY24), the energy segment contributed 31 per cent to the company’s overall consolidated revenue from operations of Rs 4,873.2 crore. 

The business division’s contribution was at 33 per cent in the same quarter.

It is not clear at what valuation the business will be demerged.

Past attempts of the sale of other business divisions to promoter companies have not been met with shareholder optimism over valuations.

In July, the shareholders of the company voted against the proposed sale and transfer of the new low-voltage motors and geared motors businesses to the parent company’s German arm.

 Siemens Energy was established in 2020, however, the Indian entity was not yet unbundled "for administrative reasons", Siemens Energy noted in its statement.