MUMBAI (Reuters) - Drugmaker Jubilant OrganosysJUBO.BO has decided to spin off its non-pharma business into a new unit to help it grow as a life sciences-focused enterprise under a new name, Jubilant Life Sciences Ltd.
The demerged entity, to be called as Jubilant Industries Ltd, would continue to grow in the agri and performance polymer segment and would be separately listed on the stock exchanges by January 2011, the company said in a statement on Thursday.
Under the new arrangement, Jubilant shareholders will get one share in the demerged entity for every 20 held, it added.
“The newly formed entity would build expertise and grow in the field of polymers and fertiliser, while Jubilant Life Sciences would become a firm focused on life sciences segment,” Chairman Shyam Bhartia told television channel CNBC-TV18.
The company also announced the amalgamation of its unit Speciality Molecules Ltd and Pace Marketing Specialities Ltd, a contract manufacturer of adhesives, with itself.
Analysts said the spin-off would improve the performance of Jubilant’s pharma business.
“The move will help Jubilant improve the returns ratio and achieve better value unlocking for its pharma business,” Sarabjit Kour Nangra, vice president, research, Angel Broking, said.
“The agri-performance polymer (APP) business was dragging down the performance of Jubilant’s pharma business because the margins in APP are very low,” another analyst with a Mumbai-based brokerage said.
The APP business generated income of 4.19 billion rupees in FY10 for Jubilant Organosys — about 11 percent of total revenue 37.81 billion rupees — the company said.
“The APP business is expected to post operating margins of 10 percent in FY11,” R. Sankaraiah, Jubilant’s executive director, finance, told a conference call.
Shares of Jubilant Organosys closed at 378.05 rupees on Thursday, down 1.97 percent in a firm Mumbai market that ended 1 percent higher.
Editing by Harish Nambiar