Mukul Agarwal stock crashes 8% after three-way demerger announcement

Synopsis: Shares of this textile company fell 8 percent after its three-way demerger announcement, as investor sentiment weakened amid concerns over restructuring and future earnings visibility.

The company, which owns key brands like Lux Cozi, Lyra, and ONN, offers several products, operates 9+ facilities with a 1.2M daily garment capacity, and has a vast network of retail outlets, gaining investor traction after the demerger announcement.

With a market capitalization of Rs. 4,886 crore, Lux Industries Ltd’s shares on Friday made a low of Rs 1,615.30 per share, down by 8.03 percent from its previous day’s close price of Rs 1,756.40 per share. The company’s share gave a return of 15 percent over the last year, and it has an investor, Mukul Mahavir Agrawal, holding a 1.47 percent stake in the company as of the latest Q4.

Demerger Update

Lux Industries approved the trifurcation of its business into three verticals in November 2023. Following the FSA, the board granted in-principle approval for the demerger, subject to regulatory and stakeholder approvals, with two resulting entities to be listed separately.

Vertical A and C will be demerged into separate listed companies, while Vertical B will remain within the existing entity. Leadership roles are proposed within the Todi family, with different members expected to head each vertical and drive focused business operations.

Lux Industries will see management control shift solely to the Pradip Kumar Todi family, while the Ashok Kumar Todi and Navin Kumar Todi families will exit management roles. The board also approved the incorporation of two wholly owned subsidiaries in West Bengal, aligned with the proposed demerger structure.

The company revised brand licensing agreements with Biswanth Hosiery Mills Ltd to safeguard rights over key brands, while non-Lux brands were assigned within promoter group entities. The core ‘Lux’ trademark will remain with BHML and be licensed to all entities, ensuring no disruption in intellectual property usage.

Overall, while the restructuring aims to unlock value through focused verticals and clearer business segmentation, near-term sentiment remains cautious due to execution risks and earnings visibility concerns. Stability in operations and smooth transition across entities will be key to restoring investor confidence.

How many shares will you get?

Under the proposed demerger of Lux Industries, shareholders are expected to receive shares in two new listed companies for Verticals A and C, while continuing to hold shares in the existing company for Vertical B. Thus, investors will end up holding shares in three entities post demerger, subject to regulatory approvals and final scheme terms.

About the Company

Lux Industries Limited, founded in 1957 as Biswanath Hosiery Mills by Girdharilal Todi, is a leading Indian innerwear manufacturer headquartered in Kolkata. With a significant market share in the mid-market hosiery segment, it produces over 100 products under brands like Lux Cozi, Lyra, and ONN. The company has 7+ manufacturing facilities and a massive distribution network of over 500,000 retail outlets, with exports to 46+ countries.

Financial Highlight: The revenue from operations grew by 21.6 percent to Rs 673 crore in Q3 FY26, corresponding to the same quarter in the last financial year, and the operating margin degraded YoY to 5 percent in Q3 FY26. Accompanied by a net profit decline of 60 percent to Rs 13 crore in Q3 FY26 from Rs 33 crore in Q3 FY25, resulting in an EPS of Rs 4.43 per share in Q3 FY26.

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