UPL Drops 10% as Restructuring Raises Debt Concerns; Nuvama Cuts Rating

UPL Ltd shares saw sharp selling pressure on Monday after the company unveiled a major restructuring of its global crop protection business. The stock declined 10% to ₹677 as investors digested the implications of the proposed demerger, and brokerage Nuvama Institutional Equities cut its rating to ‘Hold’.

The restructuring aims to merge UPL SAS and UPL Corp into a new, independently listed entity called UPL Global. The parent company, UPL Limited, will transition into a holding structure focused on formulations, research and development, SUPERFORM, and Advanta. Management said the move is designed to create a unified crop protection platform while remaining cash and tax-neutral, with no change to minority shareholder rights or the group’s capital structure.

Why Did The Restructuring Trigger A Sell-Off?

The announcement triggered concerns around valuation clarity, leverage distribution and post-demerger execution risks. The management team demonstrated potential for operational and administrative synergies, but investors focused on the financial structures of the two entities.

Key points from the restructuring plan include:

• UPL Global will house the global crop protection business under CEO Mike Frank.

• UPL Limited will retain formulations, R&D and investments, with projected revenue of ₹50 billion and EBITDA margins of 7–8%.

• Existing shareholders will receive stakes in both UPL Global and UPL Limited.

• The scheme was approved on 20th February 2026 and consolidates domestic and international crop protection operations under one platform.

Nuvama said that while the demerger could unlock value by allowing businesses to be valued on standard industry multiples, debt remains a key overhang. The brokerage flagged unresolved leverage concerns and potential dilution risks after restructuring.

It downgraded UPL to ‘Hold’ and revised its target price to ₹816, applying a sum-of-the-parts valuation based on EV/EBITDA. The stock is currently valued at 9.5x FY26E and 7.7x FY27E EV/EBITDA, indicating a moderation in forward valuation multiples.

What Do The Debt And Technicals Signal?

Despite the restructuring being positioned as cash and tax neutral, the overall debt quantum remains largely unchanged. Analysts expect deleveraging to depend on operating cash flows and working capital discipline rather than structural changes alone.

Key financial and technical indicators highlighted by the market include:

• UPL Global is projected to carry net debt of ₹190 billion post-reorganisation.

• The standalone business is expected to hold net debt of ₹32 billion.

• The daily RSI (14) stands at 53.0, indicating neither overbought nor oversold conditions.

• The stock is trading below all eight of its simple moving averages, signalling a bearish technical trend.

While management emphasised that the reorganisation does not change leverage at a group level, the market reaction suggests investors are waiting for clearer visibility on debt reduction and cash flow improvement. The sharp single-day fall also reflects profit booking after the recent rally in the stock.

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Key Investor Takeaway

UPL's restructuring could establish a more organised business framework, potentially increasing the company's valuation in the future. UPL shares were trading at ₹752.35 as of 23rd February 2026. Investors could assess two factors after the demerger: whether cash flow delivery and working capital management improve, and whether UPL Global can restore its balance sheet strength to enable continuous re-evaluation in the upcoming quarters.

Sources

Economic Times