The shares of Kesoram Industries were locked on a 5% upper circuit on 1 December after the company yesterday announced the demerger and merger of its cement business into UltraTech Cement. The news of this demerger and merger scheme came after the trading hours on 30 November.

In its regulatory filing on 30 November, the company said, “The board at its meeting held on November 30 approved a composite scheme of arrangement among the company, and UltraTech Cement and their respective shareholders and creditors for demerger of its cement division into UltraTech and reduction and cancellation of the preference share capital of the company.”

The company’s board has set the share exchange ratio of 1:52, wherein 1 equity share of UltraTech Cement with a face value of Rs 10 will be given for every 52 equity shares of the company with a face value of Rs 10 held.

According to the exchange filing, Ultratech Cement will issue and allot 54,86,608 fully paid-up 7.3% non-convertible redeemable preference shares with a face value of Rs 100 each for 90,00,000 5% cumulative non-convertible redeemable preference shares of Rs 100 each of Kesoram.

Moreover, 8,64,275 fully paid-up 7.3% non-convertible redeemable preference shares of Rs 100 each of the resulting company will be issued and allotted for 19,19,277 zero percent optionally convertible redeemable preference shares of Rs 100 each of the demerged company held by the preference shareholder in the demerged company as on the effective date.

The proposed merger will unlock the value of the cement business for the shareholders of the company and also substantially leverage the balance sheet, including the reduction of debt and outflow of interest of the company.

The transaction is expected to be completed within 9-12 months, which is subject to regulatory approval.

At 11:02 am, the shares of Kesoram Industries were locked 4.99% higher at Rs 146.35 on NSE.