Siemens shares plunge 10%; here’s why

Shares of Siemens witnessed sharp selling pressure on Monday with the share price of the automation company falling as much as 10% in intraday trade after its board approved the sale of low voltage motors and geared motors businesses. Siemens Large Drives India, a subsidiary of German conglomerate Siemens AG, will buy the businesses for a cash consideration of ₹2,200 crore.

The share price of Siemens opened lower at ₹3,625, down 2.26% against the previous closing price of ₹3,708.90 on the BSE. Extending opening losses, the shares of the industrial manufacturing company nosedived 10% to hit an intraday low of ₹3,338.05, while the market capitalisation decreased to ₹1.20 lakh crore. On the volume front, 1.5 lakh shares changed hands over the counter compared with two-week average volume of 0.14 lakh stocks.

Siemens shares have been under stress for the last three sessions, falling as much as 14.2% during the same period. In comparison, the BSE Sensex rose 0.7% in the last three trading days.

At the current price level, Siemens shares trade 15% lower than its 52-week high of ₹3,940 touched on May 12, 2023, while it surged 48% against its 52-week low of ₹2,253.45 hit on June 22, 2022. The largecap stock has risen 37% in a year; 22% in six-month; and nearly 10% in a month.

The sell-off in Siemens shares were triggered as investors weighed the company board’s decision to carve out low voltage motors and geared motors businesses. According to analyst at Prabhudas Lilladher, the sale of LV business was in continuation of group strategy to carve out motors to a separate legal entity. The company had sold medium voltage business in SY22 for cash consideration of ₹440 crore, which will be effective from October 1, 2023.

“We believe that the sale is in-line with Siemens long term strategy 1) to be a leading tech-oriented company, 2) consolidate its business in high-growth areas to achieve synergies and 3) move up in value chain by providing solutions for electrification, digitalisation and automation,” says Amit Anwani, Research Analyst, Prabhudas Lilladher.

“Carving out of the motors business from Digital industries segment, won’t have any impact on execution synergy, as SIEM’s competitive edge is to provide digitalisation and automation solutions, whereas motors which are commodities product can be outsourced. Also, the intellectual property rights (IPR) for these products are with Siemens AG and it makes sense to transfer assets. LV motors finds application in Machine building, metals, F&B, chemicals, power, minerals etc,” he says.

The LV motors segment recorded revenue of ₹1,060 crore in FY23 (around 7% of SY22 revenue) and PAT of ₹130 crore (9.4% of FY22 PAT). The business has short cycle order and is focused on an outsourced manufacturing model, with Siemens design and stringent quality controls across the supply chain and manufacturing. The transaction is expected to attract capital gain tax of around 23%.

In a separate development, Siemens also announced the acquisition of an electric vehicle division from Mass-Tech Controls Pvt Ltd (MCPL) for cash consideration of ₹38 crore to address fast-growing demand for EV charging infrastructure in India. The acquisition will also help in expansion of local market presence, enable creation of exports hub and scale up its range of e-mobility solutions.