Shapoorji Pallonji’s Forbes & Co hits upper circuit for third day; here’s why

Shares of Forbes and Company, a part of Shapoorji Pallonji Group, continued their gaining streak on Wednesday, with the share price hitting 5% upper circuit for the third straight session after the company announced the demerger of its precision tools and machine parts business.  The share price of the country’s oldest registered firm has risen nearly 15.7% in the last three sessions after the engineering company said a new entity, Forbes Precision Tools and Machine Parts Limited (FPTL), will be formed after demerging from Forbes & Co. 

Extending its gains for the fifth trading day, Forbes & Co shares opened higher and locked in upper circuit at ₹766.05, up 5% on the Bombay Stock Exchange (BSE). The microcap stock has climbed 17.7% in the past five sessions. It touched a 52-week high of ₹963.60 on August 23, 2022, and 52-week low of ₹291.10 on October 1, 2021.

With a market capitalisation of ₹988.10 crore, the counter trades higher than 5-day, 20-day, 50-day, 100-day, and 200-day moving averages. The stock has delivered a solid return in the long term horizon - 518% in the past three years, 488% in five years, and 1,210% over ten year period. In the short term, the stock rose 158% in one year, 88% in six months, and 1% in a month.

As per the scheme, four fully paid up equity shares of ₹10 each of the resulting company (FPTL)  will be issued and allotted to the equity shareholders of the demerged company (Forbes & Co) for every one fully paid up equity share of ₹10 each held by them in the demerged company as on the record date. Following demerger, shares of FPTL would be applied for listing on BSE, while FCL will not undergo any change in shareholding pattern. There is no cash consideration involved in the scheme.

The Shapoorji Pallonji Group in a filing to the BSE on Monday said, “The board of directors of Forbes & Company at their board meeting held on September 26, 2022 have, inter alia, approved the scheme of arrangement between Forbes & Company and Forbes Precision Tools and Machine Parts Limited (FPTL) and their respective shareholders under Section 230 to 232 of the Companies Act, 2013 and other applicable provisions and the Rules framed thereunder.”

The demerger will allow the companies to focus and enhance their respective businesses by streamlining operations and their management structure ensuring better and more efficient management control.

“The segregation shall enable them to move forward independently, with greater focus and specialization, building on their respective capabilities and their strong brand presence. It will also help to channelisee resources required for all the businesses to focus on the growing businesses and attracting the right talent and providing enhanced growth opportunities to existing talent in line with a sharper strategic focus on the business segment under a separate entity,” it added.

The demerger scheme is subject to necessary approvals by the stock exchanges, Securities and Exchange Board of India (SEBI), shareholders and creditors of the company, the National Company Law Tribunal (NCLT), and other such regulatory authorities.

Forbes & Co is engaged in the business of precision tools business; industrial automation, coding, medical devices, parts and applications and ventilator business; real estate business; investment into subsidiaries, joint ventures and associates.

FPTL, a wholly owned subsidiary of Forbes & Co, was incorporated on August 30, 2022, to carry on the business of manufacturers, importers, exporters, buyers, sellers, traders, dealers, distributors, service providers of engineering and electrical products and services. The turnover of the FPTL for the financial year ended March 31, 2022, was ₹179.22 crore. The turnover of the precision tools business was 76.25% to the total turnover of the company in the financial year ended March 31, 2022.