This is intended to be a ``classical'' demerger, that is, with both the companies having identical shareholding pattern, at the time of the demerger. According to a company press release, the current subscribed and paid-up capital of Godrej Soaps is Rs 59.82 crore, divided into 5,98,28,780 equity shares of Rs 10 each. When the demerger comes into effect, the capital of Godrej Soaps will be reorganised to Rs 35.89 crore, divided into 5,98,28,780 shares of Rs 6 each. Additionally, the eligible shareholders of Godrej Soaps, on a record date, to be finalised later, will be issued and allotted 5,98,28,780 shares of Rs 4 each in Godrej Consumer Products Ltd, aggregating Rs 23.93 crore.

According to Godrej Soaps Ltd chairman Adi B Godrej, ``this demerger will create a new company which will be focused on the FMCG sector and will enhance shareholder value. Godrej Consumer Products Ltd is expected to have ROCE and RONW ratios comparable with other strong FMCG companies in India.''

Since the move is aimed at creating shareholder value, the company expects an appreciation in share price. ``We would expect the share price to get better and see an improvement in the P/E ratio,'' said Mr Godrej.

The Godrej Soaps scrip on the BSE shot up by Rs 4 to close at Rs 58.95 on Friday, against its previous close of Rs 54.60. The spurt is said to be in anticipation of the board approval for the demerger.

``We expect the consumer products business to report a healthy 25 per cent growth this fiscal, which is well above the industry average growth,'' said Mr Godrej. The consumer products division reported a 17 per cent rise in turnover for the half year ended September 30, 2000. The business which will remain with the residual company after the demerger include chemicals, medical diagnostics, estate and strategic investments. The name of the existing company post-demerger will change to `Godrej Industries Ltd'.