Siemens Ltd. saw its share price rise by nearly 7% on Wednesday, March 26, 2025, reaching a high of ₹5,520 per share after receiving approval from the National Company Law Tribunal (NCLT) for the demerger of its energy arm, Siemens Energy India Ltd. This surge in stock price marked the company’s highest level since February 10, 2025.
The NCLT's decision is a key move in the restructuring of Siemens Ltd., as it will allow Siemens Energy India to be listed separately on stock exchanges, unlocking potential value for shareholders. Each Siemens shareholder will receive one equity share of Siemens Energy India for every share they hold in Siemens Ltd. as of April 7, 2025, the record date for allotment eligibility.
The appointed date for the demerger is March 1, 2025, with the formal transaction set to take effect from March 25, 2025. Guilherme Vieira De Mendonça, previously the head of Siemens' energy business, has been appointed as the Managing Director and CEO of the newly created entity, while Harish Shekar takes on the role of Executive Director and CFO after serving as the finance head.
This demerger follows a previous global strategy initiated by Siemens AG—the parent company—which globally demerged its energy business back in 2020, reinforcing a significant shift in its operational focus.
According to a recent report by Elara Capital, Siemens Ltd. recorded a 21.5% rise in net profit for the December quarter, amounting to ₹614.6 crore, compared to ₹505.7 crore during the same period last year. Despite this positive profit increase, consolidated revenue for the company saw a decline of 3.3%, dropping to ₹3,587.2 crore from ₹3,709.5 crore. Similarly, earnings before interest, taxes, depreciation, and amortization (EBITDA) fell by 11.5% to ₹401 crore compared to ₹453 crore a year prior, and the company's margin shrank to 11.2% from 12.2%.
This revenue downturn was primarily driven by decreased performance in the energy segment, where revenue declined year-on-year from ₹1,518 crore to ₹1,485 crore. Yet, the company achieved an 18% growth in new orders, totaling ₹6,245 crore compared to the same period last year, showcasing a robust demand for its offerings, despite certain setbacks.
In response to the recent developments, Elara Capital has rated Siemens Ltd. as a ‘buy’, with a target price of ₹5,940, indicating an upside potential of up to 23%. The brokerage also noted a revision in its FY25E/26E earnings per share estimates, trimming them by 11% and 13% respectively. The reductions stem from anticipated delays in the execution of locomotive orders and lower budgetary allocations for infrastructure, which are likely to impact future order inflows from both government and private sectors.
However, they reaffirmed the outlook for Siemens Ltd., asserting that the company would benefit significantly from a multi-year capital expenditure cycle in both public and private sectors. Analysts anticipate an earnings compounded annual growth rate (CAGR) of 16% from FY24-27E, with an expected return on equity (ROE) of 18% from FY25-27E, further indicating that Siemens has a strong diversification strategy and technological edge.
In the early hours of trading on March 26, Siemens Ltd. shares reached as high as 7.83%, marking a notable recovery compared to a 0.14% decline observed in the wider Nifty 50 index. This stock performance illustrates the market's response to the strategic changes being implemented through the demerger.
Over the past 12 months, Siemens' stock has increased by 7.9%, though it faced a decline of approximately 17.03% year-to-date. Out of 25 analysts monitoring Siemens, 15 maintain a 'buy' rating, while five suggest a 'hold' and another five recommend a 'sell', according to Bloomberg data.
The demerger not only signifies strategic repositioning within Siemens Ltd. but also reflects a wider trend in the corporate world where companies seek to unlock shareholder value by creating specialized entities that can operate independently. As the energy sector continues to evolve, stakeholders will keenly watch Siemens Energy India’s performance, especially given its recent substantial growth in net profit and revenue resilient trends.
With its renewed focus on the energy sector, Siemens Ltd. is poised for potential growth and value creation as it embarks on this new chapter, providing an exciting prospect for investors and market observers alike.
