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Abstract
The Indian business environment has altered radically since 1991, due to decontrol and deregulation of the economic policies, the corporate India faced an unprecedented challenge and fierce competition. To accommodate the changing environment, the Indian business houses started corporate restructuring. Demerger as a corporate restructuring gained its momentum more and more in the last decade and as a strategic tool helps the companies to stay focused and improving its revenue generation. In this backdrop the present paper seeks to examine the pre demerger and post demerger revenue performance of the demerged company with the help of financial measuring tools.
Key words:
Corporate restructuring, Demergers, Demerged Company, Resultant Company, Revenue Generation.
Demerger as a concept first invented in America way back in 1920s. In India demerger as a concept became popular after the deregulation of policies happened in 1991. Slowly demerger emerged as a favourite corporate strategy for many Indian business houses. Demerger as a corporate strategy is one of several ways through which a firm may divest a division and improve its focus on its core operation. A demerger is the opposite of a merger. A demerger results where a corporate enterprise dispossesses of one or more of its business units to any other corporate body, whether existing or newly formed for the purpose. The Company, whose division is transferred, is termed as the Demerged Company and the Company to which the division is transferred is termed as the Resulting Company. Demerger companies often have to contract or diversify their size of operations in certain occasions such as when a division of the company is not performing up to the expectation of the stakeholders, or because it no longer fits into the firm's strategic policies, or give effect to rationalization or specialization in the manufacturing process or to become big and increase their profit margin. Sometimes it may also happen to undo a previous merger or acquisition which proved unsuccessful. Demerger as a corporate restructuring can be taken place in various forms such as spin offs, split offs, split ups etc.
Large business houses sometimes hinder entrepreneurial initiative, sideline core activities, reduce accountability, and promote investment in non core activities. There is an increasing realization among companies that demerger may allow them...