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The Board of Directors of KM Sugar Mills Limited made a major announcement today, August 7, 2025, approving a comprehensive Scheme of Arrangement for the demerger of its Distillery Division into a wholly owned subsidiary, KM Spirits and Allied Industries Limited. The move, subject to regulatory and shareholder approval, is set to reshape the company’s business landscape and unlock new opportunities for growth and value creation.
The Distillery Division—responsible for the manufacture and sale of rectified spirit, ethanol, country liquor, and extra neutral alcohol—into an independent, focused entity. This strategic step follows approval at the board meeting today and is designed to enhance operational agility while allowing sharper sector-specific management and value capture for shareholders.
Key Aspects of the Demerger
The demerger will be implemented under the provisions of sections 230-232 of the Companies Act, 2013.
Upon the scheme’s completion, all assets, liabilities, and properties of the Distillery Division will transfer to KM Spirits and Allied Industries Limited, with the division operating on a going concern basis.
KM Spirits and Allied Industries is currently a wholly owned subsidiary but will issue fresh equity shares to KM Sugar Mills’ existing shareholders, mirroring the parent structure.
The Share Entitlement Ratio has been rigorously evaluated and set at 1 equity share in the resulting company for every 5 shares held in KM Sugar Mills.
The arrangement has been vetted by Corporate Professionals Capital Private Limited, a SEBI-registered merchant banker, offering a Fairness Opinion based on valuation by Axiology Valuetech Private Limited.
Financial Impact and Division Details
The Distillery Division contributed INR 91.21 crore in turnover for the year ending March 31, 2025, comprising 13.29% of KM Sugar Mills’ total standalone turnover for the year.
The division houses the company’s entire alcoholic spirits operations, representing a mature and robust business unit with strong growth prospects.
Rationale and Benefits
KM Sugar Mills cited several pivotal reasons and anticipated outcomes for the demerger:
Distinct business dynamics, differing regulatory environments, and unique customer profiles for the sugar and distillery segments necessitate dedicated management and operational focus.
With the Distillery Division now independently viable, separating it allows for tailored growth strategies, risk management, and strategic capital raising focused solely on the spirits sector.
The move will enable independent, market-driven valuation for each vertical, providing transparency and flexibility to shareholders.
Investors will gain the option to target their holdings toward either the legacy sugar business or the emerging spirits-focused enterprise.
Each independent entity will more efficiently attract investors, lenders, and strategic partners appropriate to its sector.
The resulting company will seek listing on major stock exchanges (BSE and NSE) subject to applicable legal exemptions and regulatory approvals, further strengthening shareholder value and market vibrancy.
Shareholding and Listing Details
There will be no change in the shareholding of KM Sugar Mills itself.
Post-demerger, KM Spirits and Allied Industries will mirror the shareholder structure of the parent, as all shares currently held by KM Sugar Mills in the subsidiary will be cancelled and new shares allotted to existing shareholders in a 1:5 ratio.
The resulting company is committed to seeking immediate stock exchange listing, ensuring liquidity and tradability for new shareholders.
Outlook
This significant restructuring initiative underscores the management’s focus on strategic clarity and operational efficiency. By creating two specialized and independently managed businesses, KM Sugar Mills aims to unlock new levels of value for shareholders while positioning both entities for sustained growth within their respective markets.
Source: Company Disclosure to the Stock Exchanges
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