Demergers have become a go-to strategy for conglomerates across segments in India and some of the country’s top corporate houses have recently opted to split their operations in a bid to unlock value. Companies are also going for demergers to strengthen their core or primary businesses, hiving off and listing non-core operations into a separate unit.
In 2025, several major conglomerates announced that they are undertaking strategic demergers to streamline operations, unlock shareholder value, and focus on core competencies.
Here are key factors convincing India Ind to opt for demerger:
a) Unlocking shareholder value: Demergers allow each business to be valued independently, often leading to a higher combined market capitalization.
b) Focused strategy and core competence: Demergers allow management teams to be more aligned with the distinct needs of the business, leading to a more focused strategy.
c) Improved operational efficiency: Demergers help companies operate with leaner cost structures and facilitate faster decision-making processes.
d) Attracting targeted investors: Demergers help investors pick and choose exposure based on their preferences.
e) Better capital allocation: Demergers let each separated unit control its own capital, improving accountability and return on investment.
While we analysed the key factors that are leading the conglomerates to demerge their businesses, key demergers that made headlines in FY25 include ITC, Hindustan Unilever (HUL), Aditya Birla Fashion and Retail (ABFRL), Vedanta, Tata Motors, among a few others.
Major demergers:
ITC Limited: ITC-ITC Hotels demerge, effective January 1, 2025, had received approval from the National Stock Exchange and BSE Limited for listing and trading of its equity shares effective January 29. In terms of structure, ITC Hotels will issue equity shares directly to the shareholders of ITC in a manner that about 60 per cent stake is held directly by ITC shareholders proportionate to their shareholding in ITC and remaining about 40 per cent stake to continue with ITC.
For the first quarter post demerger from ITC, ITC Hotels posted profit at Rs 256.90 crore. This was 40.78 per cent higher in comparison to Rs 182.48 crore recorded during the corresponding quarter of FY24. It posted revenue from operations at Rs 1060.62 crore, up 16.90 per cent on-year.
The company said that the rationale for demerger was to unlock shareholder value and allow the hotel business to pursue independent growth strategies.
Hindustan Unilever: HUL, on January 22, had officially approved the demerger of its ice cream business into a separate listed entity, Kwality Wall’s (India) Limited (KWIL). Per the directive by the company, pursuant to the scheme, one equity share of KWIL will be allotted for every one equity share held in HUL. Upon demerger and listing of KWIL, the entire shareholding of KWIL will be held directly by shareholders of HUL.
Rohit Jawa, CEO and Managing Director, HUL, said, “Our Ice Cream category is a high-growth business with iconic brands such as ‘Kwality Wall’s’, ‘Cornetto’ and ‘Magnum’, operating in an attractive segment. The demerger will unlock fair value for HUL shareholders and give them the flexibility to stay invested in Ice Cream’s growth journey.” The decision was made in view of the ice cream business’s different operating model, including differentiated infrastructure for supply and distribution, capital allocation needs, distinct channel landscape, and go-to-market strategy.
For the year ended March 31, 2024, the turnover of the ice cream business undertaking was Rs 1,595 crore, representing 2.7 per cent of the total standalone turnover of the company.
Aditya Birla Fashion and Retail: Aditya Birla Fashion and Retail Ltd (ABFRL) demerged into two listed entities – ABFRL and Aditya Birla Lifestyle Brands Ltd (ABLBL) with May 22 as the record date for this demerger. The demerged ABFRL, during the fourth quarter, narrowed its loss Rs 23.55 crore from Rs 266.36 crore during the year-ago period. The entity tripled its EBITDA to Rs 295 crore driven by sharp margin expansion in Pantaloons & ethnic segments. ABLBL, meanwhile, delivered strong profits backed by LTL growth at 9 per cent
Per the company statement, ABLBL will be listed by the end of June 2025. In a regulatory filing, ABFRL said that the shareholders of Aditya Birla Fashion will be eligible to receive one share of the demerged entity, Aditya Birla Lifestyle Brands Ltd, for every one share that they own as of the record date.
The Group has articulated the many positives that will arise from the demerger. The operating architecture for both companies, it said, will allow sharper focus on their individual business strategies. Further, the company added, the demerger will help existing shareholders unlock value for the overall business portfolio through price discovery of the individual entities. The two entities will also be able to address stronger capital market outcomes. The demerged ABFRL will focus on larger market segments (TAM) with high growth, leveraging its strengths in distribution.
Vedanta Ltd: Earlier in February, Vedanta received shareholders’ and lenders’ approval for splitting of the conglomerate into five independent, sector-focused entities. The demerger will carve out four new companies from the parent Vedanta Limited, which will continue to exist as the fifth entity. The new entities will include: Vedanta Aluminium Metal, Vedanta Power, Vedanta Oil & Gas and Vedanta Iron and Steel Limited.
The company said that each of these will be listed on the stock exchanges. For every share held in Vedanta, eligible shareholders will receive one share in each of the four new companies. The record date to determine eligibility will be announced soon, it said.
“Following the completion of this undertaking, achieved through a series of demergers from the current conglomerate structure, Vedanta will be the sole or majority owner of 17 investment vehicles,” it said in a statement.
Tata Motors: Tata Motors has announced that the company is splitting into two separate listed companies – Tata Motors Passenger Vehicles (TMPV) – housing ICE cars, EVs, and Jaguar Land Rover; and Tata Motors Commercial Vehicles (TMLCV) – covering trucks, buses, and spares. After the demerger, Tata Motors will morph into two separately traded shares with a face value of Rs 2 each. Tata Sons Chairman N Chandrasekaran described the demerger as a strategic move to accelerate business performance. The business split is expected to be completed in the second half of 2025.
Earlier this month, Tata Motors released its fiscal fourth quarter earnings report with profit at Rs 8,470 crore, down 51 per cent YoY. EBITDA climbed 0.6 per cent to Rs 16,644 crore in Q4. The board also announced a final dividend of Rs 6.00 per Equity Share.