Indo Rama Synthetics plans to demerge its spun yarn unit into a separate company called Newco and keep the polyester business with the parent firm.

The company says the spinning and polyester businesses require different focuses and strategic initiatives if they are to grow. It added that segregating the two businesses would enhance shareholder value.

As part of the reorganisation Indo Rama's share capital will be split 80:20 between the existing company and the new spun yarn company. Shareholders will be able to convert their equity shares into preference shares with a face value of Rs10, redeemable at a premium of Rs20.

The redemption will be in two instalments of 25 per cent and 75 per cent of the total value at end of six months and 15 months from date the court order is filed.

The move is subject to the go-ahead from shareholders, and Indo Rama expects the demerger and restructuring to take around six months.