Triveni Engineering Discloses Cost Allocation Ratio for Demerger
Triveni Engineering & Industries Limited has informed the stock exchanges about the allocation of the cost of acquisition of equity shares following the implementation of its Composite Scheme of Arrangement. The update provides important guidance for shareholders on how to calculate the cost of their shares for future income tax and capital gains purposes.
The company disclosed in accordance with Section 72A(4) of the Income-tax Act, 1961 (read with the applicable provisions relating to demergers).
Share Cost Allocation After Demerger
Under the approved scheme, Triveni Engineering & Industries Limited has demerged its power transmission business into Triveni Power Transmission Limited (TPTL). As part of the demerger, eligible shareholders received shares of the resulting company.
The company has now announced the proportion in which the original cost of acquisition should be divided between the two companies:
- Triveni Engineering & Industries Limited (Demerged Company): 86.60%
- Triveni Power Transmission Limited (Resulting Company): 13.40%
This allocation will help shareholders determine the revised cost of acquisition of their shares after the demerger.
Why This Is Important for Investors
The cost allocation is primarily relevant for income tax and capital gains calculations.
If shareholders decide to sell either their Triveni Engineering & Industries shares or Triveni Power Transmission Limited shares in the future, the acquisition cost used to calculate capital gains should be apportioned using the percentages announced by the company.
This clarification helps investors comply with tax regulations and ensures a standardized method for calculating capital gains after the corporate restructuring.
About the Demerger
The allocation follows the implementation of the company’s Composite Scheme of Arrangement, which includes:
- Demerger of the power transmission business into Triveni Power Transmission Limited (TPTL).
- Other restructuring steps as approved under the scheme.
The demerger is aimed at creating focused businesses, allowing each company to pursue its own growth strategy while unlocking value for shareholders.
What Shareholders Should Do
Existing shareholders should keep this allocation in mind while maintaining their investment records. The revised acquisition cost will be useful when calculating capital gains tax if they sell shares in either company in the future.
Investors may also wish to consult their tax advisors to understand how the revised cost allocation applies to their individual tax situation.