Written By: Saiyam Sondhi
A Tale of Two Companies, Two Outcomes, and One Big Lesson
Imagine this.
You’re holding a single keyring with three keys, one for your house, one for your car, and one for your office. It’s heavy, clunky, and confusing. Sometimes, in a hurry, you fumble to find the right one. Now picture splitting those keys onto separate keychains: one for home, one for work, one for travel. Everything becomes smoother, faster, simpler.
That’s how companies think about demergers.
When a business grows big, with multiple arms doing completely different things, it can become hard to manage, hard to value, and hard for investors to understand. So, leaders decide: “Let’s separate the businesses. Give each a chance to grow on its own.”
Sounds clean, smart, even obvious, right?
But here’s the catch, splitting a business is easy on paper. What follows the split decides whether value is unlocked… or destroyed.
To understand this better, let’s walk through two real stories from India’s corporate world. One is a demerger that failed to deliver its promise. The other? A textbook success that turned a quiet brand into a consumer giant.
Both stories are about separation. But only one led to transformation.
Chapter 1: Dish TV – A Demerger That Looked Right but Went Wrong
Let’s rewind to 2006. At that time, Zee Telefilms Ltd. was India’s media kingpin. It had everything under one roof, TV serials, news channels, cable networks, and a growing DTH (Direct-To-Home) satellite TV business. But investors were confused. The company had become a jigsaw puzzle of different businesses, each with its own risks and returns.
To fix this, Zee’s management made a bold call: break it apart into four focused companies.
So, they did.
– Zee Entertainment Enterprises Ltd. (ZEEL) would handle the core broadcasting business.
– Zee News Ltd. would manage the news channels.
– WWIL would manage cable distribution.
– Dish TV India Ltd. would take on the DTH satellite service.
Each of these units got listed separately. Investors received shares in all. And among them, Dish TV looked like the future, India’s first DTH service, rapidly gaining subscribers, and poised to grow with rising TV penetration in small towns.
But over the next decade, the story turned on its head.
Where the Dream Started Cracking
At its peak around 2017, Dish TV had close to 16 million subscribers, roughly 25% of India’s DTH market. It was a household name, a pioneer in bringing satellite TV to remote corners of the country.
But the world was changing, fast.
OTT platforms like Netflix, Prime Video, and Disney+ Hotstar had arrived. People no longer needed a dish antenna to watch their favourite shows. All they needed was a smartphone and Wi-Fi.
Then came JioFiber and Airtel Xstream, bundling ultra-fast internet with content, at aggressive prices.
Meanwhile, Dish TV… didn’t adapt quickly. No strong OTT partnerships. No bundled data plans. No hybrid boxes. While the competition surged forward, Dish TV stayed stuck in a declining format.
By 2025, things looked grim:
– Subscribers had dropped to ~11 million, down over 30% from its peak
– Market share fell to 16–17%, overtaken by smarter, leaner players
– Its brand no longer resonated with a younger, streaming-first generation
But the decline wasn’t just about changing technology. It was also about what was happening inside the company.
The Governance Meltdown
While Dish TV was losing ground in the market, its promoters, the Essel Group, were losing control.
In 2019, to manage other financial obligations, the Essel Group pledged nearly 94% of its Dish TV shares. That’s like mortgaging almost everything you own. When markets turned volatile, lenders started selling the pledged shares.
This led to a dramatic shift.
By 2020, Yes Bank became the largest shareholder, not through investment, but because it invoked pledged shares. What followed was chaos:
– Boardroom battles erupted over who should control the company
– AGMs got delayed, shareholder voices were sidelined
– SEBI raised concerns over disclosure lapses
– Minority investors lost trust
By mid-2025, promoter holding had fallen to just ~4%, with remaining pledges down to ~12%. But the damage to investor confidence was already done.
The Financial Freefall
Let’s look at the numbers to understand how bad things got.
| Year | Revenue (₹ Cr) | EBITDA Margin | ROCE | Net Profit Margin |
|---|---|---|---|---|
| 2018 | 4,634 | 29% | 21% | -1.8% |
| 2021 | 3,249 | 63%* | 12% | -36% |
| 2025 | 1,568 | 34% | Negative | -67.1% |
*Note: 2021 margin spike was due to deep cost-cutting, not actual growth.
Over seven years, revenue collapsed by two-thirds. Returns on capital turned negative, and the company recorded deepening losses year after year.
The worst part? Investors who once believed in the “value unlock” found themselves holding a shrinking, struggling business, and no one to hold accountable.
Chapter 2: Adani Wilmar – A Demerger That Truly Worked
Now let’s flip the coin and look at a very different story.
Until 2022, Adani Wilmar, best known for the Fortune brand of edible oils, was part of Adani Enterprises Ltd., a giant conglomerate dealing in everything from coal and ports to logistics and renewables.
The consumer business was growing steadily, but it was hidden inside an infrastructure-heavy portfolio. Investors couldn’t assign it a fair valuation.
So, Adani did what Zee had done years earlier, they decided to spin off Adani Wilmar into a standalone listed company.
But this time, everything was different.
The Rise of Fortune
Once independent, Adani Wilmar hit the ground running.
– It expanded its portfolio beyond oils into atta, sugar, soya, and packaged foods
– It launched Fortune Mart outlets and invested heavily in rural distribution
– It created Fortune Online, reaching deeper into Tier II/III cities
– It grew its retail footprint to 1.7 million+ outlets across India
Let’s talk numbers:
| Year | Revenue (₹ Cr) | EBITDA Margin | ROCE | Net Profit Margin |
|---|---|---|---|---|
| 2019 | 28,797 | 4% | 27% | 1.3% |
| 2023 | 58,185 | 2% | 10% | 1.0% |
| 2025 | 63,672 | ~4.2% | 21% | ~2% |
– Revenue more than doubled in six years
– Margins recovered post-expansion, signalling scalability
– ROCE hit 21%, reflecting efficient use of capital
No governance scandals. No promoter pledges. Just sharp execution and a focused FMCG vision.
Investors finally saw Adani Wilmar for what it was, not a side business of a conglomerate, but a consumer giant.
So… Does a Demerger Always Unlock Value?
Here’s the truth, plain and simple:
A demerger is not a miracle cure. It’s just a tool, like a scalpel. In the hands of a good surgeon, it can save a life. In the wrong hands, it can do more harm than good.
In both Dish TV and Adani Wilmar’s case, the companies were given a new identity. But only one used it well.
When Demergers Work
Not all spin-offs are born equal. A demerger creates value only when the new entity is not just separated, but also strategically ready, financially sound, and governed wisely.
Let’s dive deeper:
1. Strong Fundamentals + Future-Ready Market
If the business being spun off already has healthy cash flows, scalable operations, and is positioned in a growing industry, a demerger helps that unit shine without being overshadowed by unrelated segments.
Example: Adani Wilmar thrived because the FMCG market was expanding, and it already had a strong product (Fortune) in consumers’ kitchens. Once separated from Adani Enterprises’ infra-heavy portfolio, it finally received the attention and valuation it deserved.
2. Clean Governance and Clear Accountability
The newly formed company must have an independent board, clear compliance systems, and no hidden promoter interference or financial entanglements. Investors need to trust who’s in charge.
If the parent keeps interfering or the promoter keeps pledging shares, that independence is just an illusion.
3. Leadership That’s Focused and Aligned
The post-demerger leadership must have skin in the game and a long-term mindset. It should treat the new company like its primary mission — not a side hustle.
Many successful demergers appoint new, seasoned CEOs with industry-specific expertise, not just former deputies from the parent company.
4. Clarity of Purpose and Strategic Vision
When the spin-off has a clear product line, defined target market, and dedicated capital structure, it allows for focused innovation, agile decision-making, and smarter capital deployment.
Imagine separating a delivery company from a logistics giant — now it can focus on last-mile speed, mobile tracking, and customer experience instead of waiting for directions from a mining executive.
When Demergers Fail
Demergers are risky when companies use them to distract from deeper problems—or when the split happens without preparation. Instead of creating value, they end up spreading the mess across more companies.
1. Legacy Business in Decline
If the spun-off unit is already losing market share or operating in a sunset industry (like traditional DTH TV or legacy telecom), independence only exposes its fragility.
Example: Dish TV was carved out just as the DTH business began facing disruption from OTT platforms and broadband bundles. It couldn’t innovate fast enough — and the demerger only magnified its weakness.
2. Weak Governance and Promoter Control
When promoters retain disproportionate control despite low equity ownership, or when the board is packed with loyalists, the spin-off becomes a governance black hole. Promoter pledging adds fuel to the fire.
This leads to proxy fights, delayed decisions, and erosion of investor trust — as we saw in Dish TV when Yes Bank and other shareholders clashed with legacy promoters overboard control.
3. Financial Deterioration Hidden by Group Synergies
Sometimes, a business may have looked fine only because the parent was propping it up, via shared cash, brand umbrella, or backend operations. Once separated, the unit can’t sustain itself.
Watch for spin-offs with rising debt, falling margins, and no strong customer traction post-listing — they often mask trouble beneath.
4. Investor Confusion and Poor Communication
If the newly demerged company enters the market with poor investor disclosures, no guidance, and zero roadmap, investors don’t know how to value it — or trust it. The result? Stock stagnation or sell-offs.
Clarity isn’t just about business strategy — it’s also about how well the company communicates it.
Final Thought: It’s Not About the Split. It’s About What Comes After.
Next time someone says,
“This demerger will unlock value,”
ask them,
“Unlock value… or unlock chaos?”Because splitting something doesn’t fix it. Clarity, leadership, and vision do.