Dabur India Limited today filed its scheme of demerger with the Delhi High Court for approval. This move follows the Board meeting held on May 16 where the Board of Directors had approved a swap ratio of 1:2 (i.e. one Pharma share for every two Dabur India shares held) for the demerged Pharma and FMCG entities. The Board of Dabur Pharma Limited also met on the same date and approved the scheme of demerger.

According to details filed, the company proposes to transfer assets of Rs 214 crore pertaining to the Pharma business, out of the total asset base of Rs 521 crore, to Dabur Pharma Limited as part of the demerger. Once approved, it is proposed to list Dabur Pharma Limited on stock exchanges.

"We have been receiving encouraging views from Analysts on the demerger. The demerger would allow investors to benchmark performance of these two entities with their respective industry standards. The Pharmaceutical entity would be listed on the stock exchanges and the share holding pattern of this new company will be the same as that of Dabur India", said P D Narang, group director, Dabur India Limited.

According to Salomon Smith Barney research, "The demerger of the consumer and pharmaceuticals business is a value-enhancing move. We expect a re-rating and believe the sum of parts value will be higher than the current value of the stand alone entity." The report has reiterated the stock to outperform with a low risk rating.

As per the demerger process, the company needs to seek approvals from its creditors (both secured and un-secured) and the shareholders and provide them to the court for a decision. Dabur has already got clearances from some of its secured creditors that include: HDFC Bank, Punjab National Bank, SBI, United Bank of India and IDBI Bank. All other approvals would be obtained as per the directions of the court. The entire demerger process is expected to be completed by October this year.

Dabur had initiated its demerger exercise in January this year after the Board agreed "in-principle" to hive of the Pharma business of Dabur India into a new company. The company had appointed Ernst & Young as advisors to suggest the scheme of the demerger and implement the demerger.

After the demerger Dabur India, will concentrate on its core competencies in personalcare, healthcare, and Ayurvedic Specialities while the new Pharmaceutical company, Dabur Pharma Limited, will focus on its expertise in Allopathic, Oncology formulations and Bulk drugs.