Motherson Sumi demerger: Stock surges on record date. Should you buy?


Shares of Motherson Sumi Systems surged nearly 3% to 190 apiece on the BSE in Monday’s early deals on the record date which is today. The stock started trading ex-DWH business on Friday ahead of its record date, with DWH scheduled to listed separately by March 2022.

The auto parts maker will determine shareholders for allocation of additional shares of domestic wiring harness (DWH) business in the entitlement ratio of 1:1 on its record date i.e., one share of DWH for every share of MSSL to all existing shareholders.

“The outlook for the auto ancillaries sector is very bullish amid a push to EV theme and PLI scheme where Motherson Sumi is a prominent player. The demerged entity of domestic wiring harness is expected to list in March with an expected price between RS. 75-80,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

SAMIL will be the new name for existing listed entity after the de-merger of DWH business and merger with parent entity. The merger with the promoter entity is expected to take place on 24th January. MSWIL’s listing is expected in mid-March, subject to regulatory approvals.

“Samvardhan Motherson Sumi International limited (SAMIL) is currently trading around 190 level and I think the 190-180 zone will act as an immediate and strong demand zone for this counter while on the upside 210-220 is a resistance area, above this, we can expect fresh bullish momentum,” added Meena.

The proposed restructuring exercise creates a platform for future growth through inorganic and organic routes. This restructuring exercise is a step toward the company’s Vision 2025 – revenue target of $36bn with ROCE of 40%,” said brokerage house Emkay in a note on January 10. It has a Buy rating on the stock with a target price of 300.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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