Upper Circuit Stocks: Why is the upper circuit being hit? Experts believe the company has announced a restructuring of its business, which is directly impacting the share prices.
Gabriel India's shares have performed in a way over two days that has surprised investors. On Tuesday, the company's shares surged 20 percent, reaching ₹842.75, and on Wednesday, when the market opened, the share price immediately reached ₹1011, which was its upper circuit level.
July's Record Strongest in 17 Years
The data indicates that in the month of July over the past 17 years, Gabriel's shares have provided positive returns 11 times. This means that the share has performed well in this month in 65 percent of the instances. In the last week, the share has risen by 58 percent, while in a month it has gone up by 53 percent. Investors have received a tremendous return of 112 percent in one year and 672 percent in three years.
The Company's New Restructuring Plan is the Reason for the Surge
The biggest reason behind this surge is the new and ambitious restructuring plan announced by the company. Gabriel India has made a major decision to make its business model simpler and ber.
What is the Company's Restructuring Plan?
According to Gabriel India's plan, changes will be made in its group companies Anchemco India Pvt. Ltd. and Asia Investments Pvt. Ltd. (AIPL). Anchemco will be merged into AIPL, and after this, the automotive business of AIPL will be demerged into Gabriel India.
Under this deal, the promoters of AIPL will receive 1,158 shares of Gabriel India for every 1,000 shares they hold. This deal is based on a valuation of 8 times the estimated EV/EBITDA of 2025. The special thing is that there will be no cash transaction in this deal and there will be no debt on the company.
Deal Process and Timeline
This restructuring plan is currently at the proposed stage, and before implementing it, Gabriel needs to get approval from the company board, shareholders, creditors, NCLT, and stock exchanges. The company expects that this process will be completed in approximately 10 to 12 months.
The effective date of this restructuring has been set as April 1, 2025, while the demerger is to be completed by April 1, 2026.
What Will the Company Benefit?
Through this step, Gabriel India is going to give a new direction to its business. With this strategy, the company will not only remain a suspension manufacturer, but it will also have parts for electric vehicles, fluid control systems, sunroofs, and products related to new technology.
In addition, the group has set a revenue target of ₹50,000 crore by 2030, which will be greatly assisted by this restructuring. According to the company, this decision will strengthen business diversification, operational efficiency, and investor confidence – all three.
Market Experts' Perspective
Speaking on CNBC Awaaz, market analysts said that this strategy of Gabriel India has been very well received by the market. The plan for business expansion without any debt and the vision of becoming a multi-product company is impressing investors.
According to experts, Gabriel India is now moving towards emerging as a technology-driven, multi-segment auto component manufacturer. Due to this, the company's valuation may also increase, and its hold in the market may become even ber.
Simplicity and Strength in Group Structure
This strategic change announced by Gabriel is a major step towards making the group structure more transparent and integrated. This will speed up and make the business decision-making process more effective.
Shareholders Will Also Benefit
The process of providing shares in exchange for shares in this deal also indicates that the company is moving forward by taking its existing promoters and shareholders along. Due to no cash flow, the company's balance sheet will also not be affected.
The New Form of Gabriel India
After this change, Gabriel India is no longer just a traditional suspension company, but is moving towards becoming an institution that can provide modern auto components and technology solutions globally.
The Surge in Shares Strengthens Investor Confidence
This surge in the share market has proven that investors are optimistic about the company's strategy. The upper circuit being hit in two days due to the heavy demand for the shares indicates that the market has confidence in the future direction of Gabriel India.
