Unlocking Shareholders Wealth Through Demerger - Myth Or Reality

Abstract

Restructuring as a corpora te strategy has been widely used to meet the increased demand of product, to achieve the objectives of enhanced profit and enjoy benefits of accelerated industrialization and libe ralization. The companies have been restructuring their business to materialize the strategy of increasing shar eholders' wealth and increasing market price of the share. Unlocking or enhancing sh are h olders' va lue is the most comm onl y found reason for implementing a demerger. Companies that choose to implement a demerger believe for one reasons or another, the value of their business when separated will exceed the value of the group as a whole. Pre and Post merger strategies can lead to real economic benefits to companies in terms of real economic value by investing capital at rate of return that exceeds the cost of capital.This article reveals the impac t of demerger on shar eholders' wealth of Indian Companies.