Kotak Institutional Equities analyst Abhijit Akella has raised fresh concerns about UPL's restructuring structure, warning that the holding company arrangement may significantly cap value for public shareholders. According to CNBC-TV18, Akella explained that "there is actually a significant component... that is going to be held through UPL Ltd., and then that gives rise to the usual holding company structure." He noted that holding company discounts can vary very widely, anywhere from 20-25% at the low end to as high as 80%, creating uncertainty about how much value shareholders will realize. Kotak Institutional Equities has maintained its existing 'sell' rating and fair value on the stock, with Akella stating that a more informed assessment will be possible after valuation reports and regulatory disclosures are released.
UPL shares crashed 15% to hit ₹642 on Monday, following the company's announcement of a comprehensive group restructuring plan to create the world's second-largest listed pure-play crop protection platform. The sharp decline reflects negative reactions from both brokerages and investors, with Nuvama Institutional Equities downgrading UPL shares to 'Hold' and setting a revised price target of ₹816 per share. According to Mint, the brokerage cited the recent run-up in the stock price, unresolved leverage concerns and potential post-restructuring dilution as key reasons for the downgrade. Motilal Oswal Financial Services maintains a neutral rating with a target price of ₹730, stating that while the restructuring simplifies group structure and separates distinct earnings engines, it expects revenue, EBITDA and PAT CAGR of 8%, 12% and 37% respectively over FY25-28. SBI Securities views the restructuring as positive over the medium to long term, aided by deleveraging and the planned Advanta IPO.
UPL has announced a comprehensive group restructuring plan to create the world's second-largest listed pure-play crop protection platform. According to the company's exchange filing, the board approved a group reorganisation through a composite scheme of arrangement with the objective of unlocking value for shareholders by creating an independent and focused crop protection platform. The restructuring will consolidate UPL's India and international crop protection businesses through the scheme of arrangement, involving UPL and its subsidiaries including UPL Sustainable Agri Solutions Limited (UPL SAS) in which UPL holds a 90.91% stake, UPL Crop Protection Holdings Limited (UPL Corp) through which UPL holds a 77.78% stake in its international crop protection business, and UPL Global Sustainable Agri Solutions Limited (UPL Global) which is to be listed on stock exchanges. The parent company, UPL Limited, will continue to oversee the formulation business, R&D, SUPERFORM and Advanta, acting as a holding company. Under the new structure, the group will operate through three businesses — a global crop protection platform, a seeds business, and a speciality chemicals unit.
The restructuring will be executed through a three-step transaction process. In the first phase, there will be the amalgamation of UPL SAS into UPL at a swap ratio of 1,000 shares of UPL Ltd for every 48 shares of UPL SAS. In the second phase, there will be a vertical demerger of India's crop protection business into UPL Global on a one-to-one share swap basis. Finally, in the third phase, there will be an amalgamation of UPL Corp (international crop protection business) into UPL Global, with shareholders receiving 1,000 shares of UPL Global for every 213 shares of UPL Corp. The transaction is expected to be completed within 12 to 15 months from the announcement date, subject to the timely receipt of regulatory and other required approvals from SEBI, CCI, RBI and the NCLT. This will create two listed entities: UPL as an existing listed company as a diversified agriculture and speciality chemicals platform, and UPL Global as a dedicated crop protection platform.
The businesses under UPL Global Sustainable Agri Solutions reported revenue of ₹9,721 crore in October-December, accounting for about 80% of parent UPL Ltd's total revenue of ₹12,269 crore. According to the company's exchange filing, UPL Global would be the world's second-largest listed pure-play crop protection firm, with Syngenta Crop Protection, the Swiss giant, being the largest at $13 billion in revenue. UPL Ltd's consolidated revenue totalled ₹12,269 crore in October-December, with UPL Corp being the largest subsidiary at ₹9,163 crore revenue, followed by Superform Chemistries Ltd at ₹2,668 crore, Advanta's revenue at ₹1,574 crore, and Sustainable Agri Solutions doing ₹558 crore in revenue. Post-reorganisation, UPL Global will have its own management team led by CEO Mike Frank, focusing exclusively on crop protection, with the company expecting synergies across research, manufacturing and global market access spanning more than 140 countries.
The reorganisation is designed to provide clearer value discovery for investors by separating the crop protection business from the broader diversified portfolio. However, Mint reports that the Street is assuming a holding company discount as high as 40%, with the current market price of ₹642 indicating this discount. Nuvama Institutional Equities has assigned an EV/EBITDA multiple of 7x to UPL Global based on FY28 EBITDA estimate of ₹5,537 crore for UPL's 66% stake in it, and an EV/EBITDA multiple of 25x to Advanta based on its FY28 EBITDA estimate of ₹1,203 crore for UPL's 70% stake in it. The brokerage has applied a 20% discount to the combined valuation of these two businesses, as UPL will become a holding company. UPL's net debt remains high at ₹23,317 crore as of December-end with net-debt-to-EBITDA at 2.5x, with post-restructuring UPL Global likely to have nearly 80% of the net debt. Promoters have committed to an 18-month lock-in for their shares in UPL Global from the date of listing, ensuring stability during the transition period.
