Siemens Energy Demerger: A Bold Move or Risky Bet? 🚀 (4 Key Insights)
Siemens India is making a strategic move by spinning off its energy business into a new entity, Siemens Energy India, following approval from the National Company Law Tribunal (NCLT). This demerger will allow the energy segment to operate independently, with existing Siemens India shareholders receiving an equal number of shares in the new company. The decision mirrors a similar step taken by Siemens AG in 2020, which helped its global energy arm turn losses into profits. Siemens India, a key player in engineering and infrastructure, operates across five major segments, including smart infrastructure, digital industries, mobility, and healthcare.
The energy division, which contributes 30% of its revenue, has shown strong order growth but also faces challenges like working capital pressure. By separating the business, Siemens aims to unlock value, enabling both entities to focus on their respective growth strategies. Post-demerger, Siemens AG and its energy holding company will retain a 75% stake, with the public holding the rest. As the new Siemens Energy India prepares for an independent future, investors will be watching closely to see if it replicates the global success of its parent company’s restructuring.
Siemens Energy Demerger: A Bold Move or Risky Bet? 🚀 (4 Key Insights)
Siemens India’s stock surged 4% this week, capturing investor attention after the National Company Law Tribunal (NCLT) approved a major corporate overhaul: the company will spin off its energy division into a standalone entity, Siemens Energy India. This move paves the way for the new energy-focused company to list independently on the stock market, marking a pivotal shift in Siemens India’s strategy.
What’s in It for Shareholders?
Under the demerger plan, existing Siemens India shareholders will receive one share of Siemens Energy India for every share they hold. This 1:1 ratio offers investors dual exposure—to Siemens India’s established engineering expertise and Siemens Energy India’s specialized energy ventures. While the split could unlock value if both entities thrive, the decision isn’t just about short-term gains. It reflects a strategic realignment, allowing each business to focus on its unique growth path.
A Legacy of Innovation
Siemens’ journey in India began over 150 years ago. In 1870, German engineer Werner von Siemens revolutionized communication by laying an 11,000-kilometer telegraph line connecting Britain and India, slashing message delivery times from weeks to mere minutes. The company formally entered India in 1922 and expanded post-independence, launching its first manufacturing unit in Mumbai in 1955. Today, Siemens India spans sectors like healthcare, automation, and infrastructure, with five core divisions:
- Smart Infrastructure (32% revenue): Energy-efficient solutions, smart grids, and building technologies.
- Energy (30% revenue): Power transmission systems for industries like oil, gas, and railways.
- Digital Industries: Software and sensors for manufacturing and pharmaceuticals.
- Mobility: Railway and metro technologies.
- Healthcare & Others: Medical imaging devices like MRI and CT scanners.
In FY24 (October 2023–September 2024), Siemens India reported ₹20,500 crore in revenue, ranking as the fifth-largest contributor to its German parent, Siemens AG.
Why Split the Energy Business?
The demerger mirrors a global strategy. In 2020, Siemens AG spun off its energy division into Siemens Energy to streamline operations and reduce financial drag. The gamble worked: Siemens Energy turned profitable, earning €480 million in Q1 FY25, nearly doubling its previous year’s performance. By separating the energy arm, Siemens India aims to replicate this success, allowing the division to prioritize its distinct challenges—like funding renewable projects or managing supply chains—without competing for resources with other business units.
Post-split, Siemens AG and its energy subsidiary will retain a 75% stake in Siemens Energy India, while public investors will hold 25%.
Growth Momentum and Hurdles
Siemens Energy India is already gaining traction. In FY24:
- New orders soared 30% year-on-year to ₹8,800 crore.
- The order backlog swelled 30% to ₹10,050 crore.
- Revenue climbed 5% to ₹6,280 crore.
However, rapid growth brings challenges. Managing a booming order book requires heavy upfront spending on materials and labor, straining cash flow. Globally, Siemens Energy’s backlog surged from €80 billion in 2020 to €123 billion in 2024, underscoring the delicate balance between demand and financial health.
Looking Ahead
The demerger allows Siemens India to sharpen its focus on infrastructure, automation, and mobility—sectors poised to benefit from India’s urbanization and digital transformation. Meanwhile, Siemens Energy India can zero in on power solutions and clean energy transitions, critical areas as the country targets net-zero emissions by 2070.
Yet, questions linger. Can Siemens Energy India mirror its parent’s global rebound? Will it navigate supply chain snarls and cost pressures? Investors and industry experts will watch closely as the new entity charts its course.
Final Thoughts
Siemens India’s split is more than a corporate reshuffle—it’s a bet on specialization. By empowering both companies to innovate independently, Siemens aims to accelerate growth while addressing sector-specific demands. For shareholders, the split offers a chance to capitalize on two focused giants. But as with any major transition, execution will determine success. The coming years will reveal whether this bold move sparks a new era of innovation or tests the limits of strategic spin-offs.