CESC powers up

about 11 months ago
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CESC has risen over 5.5% today morning to Rs.950, with volumes more than doubling.

The Calcutta Electric Supply Corporation or CESC is the Kolkata-based flagship company of the RP-Sanjiv Goenka Group, is finally going ahead with its long proposed demerger plan. The change is that instead of earlier planned four business units, this new plan of demerger will result into three separate units. CESC will continue to retain the power generation/distribution business while retail and venture companies would become two separate entities.

Demerger of Generation Undertaking shall be effective upon approval of the PPA between the Generation and Distribution companies from WBERC.

Each existing shareholder of CESC, for every 10 of his holding, will be allotted additional 6 shares of Rs. 5 each in new Retail and additional 2 shares of Rs. 10 each in the Venture company. Paid up Equity Share capital of the new Retail & Venture Companies would be Rs. 40 Cr. and Rs. 26 Cr. respectively, over and above the equity share capital of CESC of Rs. 132 Cr.

Record date for this purpose would be 31st October, 2018 and listing of new Retail and Ventures shares would take place thereafter.

In response to this, our Editor, Mr.SP Tulsian said, “De-merger is now expected to get consummated in Q3FY19, which will unlock the true potential of all business. Post de-merger, for every 10 shares of CESC, shareholder would receive a) 5 shares of Haldia Energy b)5 shares of CESC Ltd c) 6 shares of FV Rs. 5 of SG Retail Ltd (that would later be consolidated to Rs. 10 face value and converted to 3 shares) and d) 2 shares of SG BPO Ltd. will be issued. CESC, Haldia Energy, RP- SG Retail and RP- SG BPO all four will be listed entities and the new distribution entity i.e. CESC Ltd will continue to hold 49.5% stake in Noida Power valued at Rs. 30 crore on Rs. 10 FV. The current paid-up capital of CESC Ltd is at Rs. 132 cr, which would increase to Rs. 198 crore by way of gift. This would lead to elimination of holding company discount, which we believe is higher than current market cap of CESC. The appointed date of de-merger is October 1, 2017 and the company is awaiting approval from West Bengal Electricity Regulator for continuation of PPA between the Generation and Distribution entity for the Kolkata circle.”

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