A logo of Siemens AG, which holds 75 percent stake in Siemens Ltd, stands outside the company’s gas turbine factory in Berlin, Germany. (Photographer: Krisztian Bocsi/Bloomberg)

Siemens Shares Surge As EU Blocks Parent’s Merger With Alstom

Shares of Siemens Ltd. surged to their highest in eight months as European antitrust regulator blocked its parent’s merger with Alstom SA, helping the Indian arm retain its rail and metro business in a growing domestic market.

The European Union regulator blocked the deal on concerns that it would be detrimental to the competition in the continent’s rail industry, Bloomberg reported. The proposed merger would have divested Siemens’ India unit of its mobility and mechanical drives business. The local arm had agreed to sell the division to the parent in February last year. It houses businesses like propulsion systems, inverters, rail signalling, rail electrification, automation, intelligent traffic management, light rail, metro and passenger coaches.

Siemens’ stock opened 0.5 percent higher and rose as much as 8 percent to Rs 1,098 apiece in early trading, the highest level since May 2018

Renu Baid, analyst at IIFL, however, said this is an interim relief till Siemens AG reverts with a new strategy for addressing technology gaps and pursues plans to benefit its shareholders.

Also read: Stopped Dead in Their Tracks: What Next for Siemens and Alstom

Rail and metro are the strongest growth businesses in the Indian industrial market as the government has increased spending on infrastructure. HSBC had said after Siemens announced its sale to the parent that it’s not good news for minority investors in India, while Deutsche Bank had expressed surprise.

Siemens India’s October-December earnings met average of estimates compiled by Bloomberg. The 16 percent revenue growth was aided power equipment and the divisions that help automate manufacturing and construction sectors. But the order flow slowed in the absence of large-ticket deals.

Siemens Q1 (YoY)

  • Revenue rose 16 percent to Rs 2,807 crore.
  • Net profit up 20 percent at Rs 228 crore.
  • Ebitda rose 13 percent to Rs 306 crore.
  • Margins at 10.9 percent versus 11.1 percent.