SKF India Limited , a leading manufacturer of bearings and related products, has announced the completion of its Industrial Undertaking demerger and released its financial results for the second quarter ended September 30, 2025. The company's board approved the unaudited financial results, which included exceptional demerger expenses related to the separation of its Industrial Undertaking.

Demerger Completion and Restructuring

SKF India has successfully completed the demerger scheme with National Company Law Tribunal (NCLT) approval. The Industrial Undertaking has been transferred to SKF India (Industrial) Limited, with an effective date of October 1, 2025. This strategic move restructures the company's operations, potentially allowing for more focused growth in both the separated units.

Financial Performance

The company's Q2 2025 results reflect the impact of the demerger process:

The company reported exceptional demerger expenses of ₹257.40 crore related to the separation of its Industrial Undertaking. These expenses significantly impacted the company's profitability metrics for the quarter.

Key Observations

1. Revenue Growth: Despite the ongoing restructuring, SKF India managed to increase its revenue by 5.87% quarter-over-quarter, indicating resilient demand for its products.

2. Profitability Impact: The exceptional demerger expenses led to a substantial decline in profitability metrics. EBITDA, operating profit, and net profit all saw significant decreases compared to the previous quarter.

3. Operating Profit Margin: The OPM for Q2 2025 stood at 13.04%, down from 23.45% in the previous quarter, reflecting the impact of the demerger expenses and potential operational adjustments during the transition.

4. Sales Performance: The company's sales grew by 5.75% compared to the previous quarter, aligning closely with the overall revenue growth.

Looking Ahead

The completion of the demerger marks a significant milestone for SKF India. As the company moves forward with its restructured operations, investors and analysts will be keen to observe how this strategic move impacts its future performance and market positioning.

The separation of the Industrial Undertaking into SKF India (Industrial) Limited may allow for more specialized focus and potentially improved operational efficiencies in both entities. However, the full impact of this restructuring on the company's long-term financial performance and market competitiveness remains to be seen in the coming quarters.

Investors should note that while the exceptional expenses related to the demerger have impacted the current quarter's profitability, these are one-time costs associated with the restructuring process. Future quarters may provide a clearer picture of the company's performance under its new structure, free from these exceptional items.

As SKF India navigates this transition, stakeholders will be watching closely for signs of how the company leverages this new structure to drive growth and enhance shareholder value in the evolving industrial landscape.

SKF India shares witnessed a sharp 54% drop in opening price on October 15, falling to Rs 2,395.85 from the previous close of Rs 5,010.75. However, this dramatic decline was primarily due to a price adjustment following the demerger of the company's automotive and industrial businesses, with the actual market-driven fall being approximately 5%.

Demerger Details

The demerger, which became effective on October 1, with October 15 set as the record date for shareholder eligibility, has led to the creation of two separate entities:

1. SKF India (Automotive): Represented by the existing SKF India shares
2. SKF India (Industrial): A new entity whose shares are expected to list in November 2024

As part of the demerger process, shareholders will receive one share of SKF India (Industrial) for every share held in the parent company.

Stock Performance

The stock hit its lower circuit at Rs 2,276.10 following the adjustment. This price movement reflects the market's initial reaction to the restructured company, focusing solely on the automotive business.

Strategic Rationale

SKF India stated that this restructuring aims to create two focused organizations with dedicated management teams. The company believes this will improve agility in responding to market dynamics, potentially enhancing value for shareholders in both segments.

Investor Implications

Investors should note that while the share price appears to have dropped significantly, this is largely an accounting adjustment. The combined value of shares in both entities post-demerger is expected to be comparable to the pre-demerger value, subject to market conditions.

Future Outlook

The listing of SKF India (Industrial) shares, scheduled for November 2024, will be a key event for investors to watch. It will provide a clearer picture of the market's valuation of the two separate businesses.

Shareholders and potential investors are advised to evaluate both entities independently based on their respective business prospects, financials, and market positions in the automotive and industrial sectors.