The share price of cement major Grasim Industries fell by 7.1% or INR 191.7 to close at INR 2,509 on the Bombay Stock Exchange as the cement business demerger formula of the company did not go well with market players.

The key benchmark equity index was down 1.56%.

On Saturday, the AV Birla Group decided to hive off the cement business of Grasim Industries into its unit Samruddhi Cement Ltd in a cashless transaction and later merge it with group firm Ultratech Cement. While the move is aimed at consolidating the group’s cement businesses into a single entity over the next eight to 10 months, analysts feel the holding company discount may lead to lower valuations.

Ambit Capital said that “The current restructuring does not offer any organization synergies and therefore we do not expect any earnings upside. We maintain a Sell on Grasim with a target price of INR 2,085 implying a downside of 22% and a Sell on Ultratech with a target price of INR 600 implying downside of 30%.”

(Sourced from Business Standards)