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The sudden drop in shares also narrowed its valuation premium over its German parent Siemens AG. According to Bloomberg data, the Indian arm of German engineering giant trades at 76 times its one year forward earnings, as against 16x commanded by the parent firm. The current valuation premium of 372% is the lowest since March 2024.
However, Indian arms of most multinational companies (MNCs) traded at premium over their foreign parents. While the decent earnings growth and steady payout of these companies attract investors to the counter, scarcity premium and safety trade are other two reasons for their rich valuations. Generally, MNCs have higher promoter holdings, resulting in lower free float. Further, they also enjoy strong technological support from their foreign parent.
Despite the selloff, the stock of Siemens has generated a return of 71% so far this year and is headed for the best year since 2009. In fact, the stock has generated a compounded return of 23% over the last ten years, against 11% yielded by the benchmark Nifty50 during the same period. That compares with 8.3% return generated by the parent Siemens AG over the last ten years.
The Friday’s selloff in Siemens stock was triggered after the company in its September quarter earnings call observed that, it will not participate in LCC technology-based HVDC tenders in India or even globally but rather target VSC-based projects. Most of the company’s current projects though, are on LCC, while the VSC projects are not very material, according to the management. LCC stands for Line Commutated Converter, while VSC is Voltage Source Converter.
Earlier in June, the company had witnessed similar selloff following Siemens Energy’s decision to sell its stake in Siemens India to the parent for €2.1 billion. Analysts had then cautioned that Siemens Energy’s 18% stake sale in Siemens to shore up its finances might become a costly burden in 2028, when it’s required to repurchase the stake.
Shares of Siemens ended the session at ₹6,868.90 on Friday, commanding a market capitalisation of $28.8 billion. In comparison, its parent Siemens AG is valued at $156.7 billion.
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