Post demerger financial performance analysis: A case study of select Indian Indian Companies

Demergers are important corporate strategy actions that aid the company in external growth and provide it competitive advantage. In today's globalized economy, rather than mergers and acquisitions (M&A), demergers are being increasingly used the world over, for improving competitiveness of companies through gaining greater market share. This paper has focused on the performance of Indian Companies which has gone for demergers. The main objective of this paper is to analyze whether the demergered Companies have achieved financial performance efficiency during the post demerger period specifically in the areas of profitability, leverage and liquidity. Paired sample t-test has been performed to determine the significance differences in financial performance standards four year before and four year after the demerger activity. In general, demerged Companies in India does not bring significance difference on the financial performance after the demerger. The finding of this study shows that there is no improvement in resulting Company's return on equity, net profit margin, interest coverage, earning per share and dividend per share post-demerger.