UPL demerger structure may cap value for public shareholders: Kotak Institutional

Abhijit Akella, analyst at Kotak Institutional Equities said investor concerns over UPL’s restructuring are mainly due to the holding company structure in the crop protection demerger, as ownership in the new listed entity will not fully pass directly to public shareholders.

“There is actually a significant component… that is going to be held through UPL Ltd., and then that gives rise to the usual holding company structure,” Akella said in a conversation with CNBC-TV18 on the sidelines of the Kotak Institutional Equities’ Chasing Growth 2026 Investor Conference. Such structures typically attract valuation discounts in the market, he added.

Akella said varying holding company discounts have created uncertainty about how much value shareholders will realise, and while the recent stock correction reflects some concerns, it is unclear if the full impact is already priced in.

“Holding company discounts can vary very widely… anywhere from 20–25% at the low end to as high as 80%,” he said.

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According to Akella, UPL’s management is aware of investor concerns and has engaged with analysts and shareholders over the restructuring plan. He added that providing an exit route for private equity investors who entered during the Arysta LifeScience acquisition remains an important objective behind the structure.

He said the company appears to have chosen the current arrangement after evaluating multiple alternatives, though future adjustments cannot be ruled out as more disclosures emerge.

Kotak Institutional Equities has maintained its existing ‘sell’ rating and fair value on the stock for now. Akella said a more informed assessment will be possible after valuation reports and regulatory disclosures are released.

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Beyond UPL, Akella said easing tariff concerns could support the broader chemical sector. Companies with exposure to export-linked value chains may benefit as earlier trade-related uncertainties are reduced.

He said the positive impact may extend across multiple firms supplying sectors such as textiles and polymers that depend on US demand, making the improvement broad-based rather than company-specific.

“We've had half a dozen buys now, and one of our top picks has been Acutaas Chemicals. We continue to stay positive on that. Other names that we continue to like, Jubilant Ingrevia, is one where we think a promising CDMO story might be developing. Clean Science. Neogen Chemicals could be an interesting theme on the battery chemicals play and a couple of other relatively undervalued stocks that we favour. One is SH Kelkar, and the other is Godrej Agrovet,” he said.

For the full interview, watch the accompanying video

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