The move by Alstom Projects India's French parent to carve out the boiler business of its Indian unit (in order to merge it with its joint venture with Shanghai Electric Group) brings much uncertainty to the listed Indian entity and to investors in its stock.

Alstom Projects India provides a range of services for the power industry that include manufacture of boilers for coal and hydro projects, providing power-related engineering procurement and construction services and supply of power automation and control systems and heat recovery systems. The company's boiler plant is located in Durgapur in India.

While the proportion of revenue the company derives from the boiler business alone is not available, the power segment as a whole accounts for over 95 per cent of the company's total revenues. With the industry moving towards providing integrated services, hiving off the boiler division at a critical time when India is actively scaling up its power capacity, creates avoidable uncertainty for the Indian unit. However, going by instances of MNCs hiving off divisions in the past (P&G Hygiene hiving off its detergents unit to a group company), the listed company is likely to receive a one-time sale consideration, which may be eventually distributed as dividends.

The stock declined 3.5 per cent after the announcement was made towards close of market hours.

Related Topics