In a major restructuring exercise in the Aditya Birla group, Aditya Birla Nuvo Limited (ABNL) has chose to merge with Grasim Industries and subsequently go for the demerger and listing of its financial services business through a composite scheme of arrangement.
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For every 100 shares of ABNL, shareholders will get 30 shares of Grasim and 210 shares of ABFS. “Post the merger and subsequent demerger of the financial services business, it will get listed with about 57% of shareholding held by the new Grasim entity and the balance will be held by the shareholders of Grasim and Nuvo together”, said Birla.
As per the scheme, ABNL will merge with Grasim and after the merger, the financial services business of the combined entity will be hived off and merged with ABFSL, whose shares will consequently be listed.
Calling it a fairly complex restructuring plan, Kumar Mangalam Birla, chairman of the $41-billion Indian multinational Aditya Birla Group, said, “It’s a play on the India growth story with a very interesting mix of mature and fast-growing business, some of which are generating good cash flows on a regular basis and some, high-growth businesses”.
AB Nuvo, a Dollars 3.6 billion conglomerate, owns life insurance, financial services and solar businesses apart from 23 pecent stake in group telecom firm Idea and four divisions.
Grasim Industries is a flagship company of the Aditya Birla Group, with business verticals such as viscose staple fibre, cement, chemicals and textiles.
The consolidated financial position post-merger is estimated to be as follows: revenues for the Grasim-Nuvo merged entity would be Rs 59,766 crore for FY16 and net profit to Rs 4,245 crore, according to an internal company presentation. As for a shareholder with 100 shares of Grasim will continue to hold the 100 Grasim shares and will also get 700 shares of ABFS. There is still some arbitrage opportunity for ABNL shareholders at the last traded market price, given the merger ratio.
There has been much speculation within the investor and analyst community regarding the rationale and details of the restructuring, after sections of the media reported that such a deal was in the offing. One among the fund managers and analysts TOI spoke to said that although the management has clarified some of their doubts, yet at the outset, the rejig “looks a tad negative” for public shareholders. “This was not the intention at all, it is complete speculation”. The billionaire chairman Birla clarified that the transaction is not to finance the growth of telecom business, housed under Idea Cellular. Reliance Industries is gearing up for the launch of its fourth generation (4G) digital services business through its arm Reliance Jio Infocomm Ltd (RJIL), in the coming months.
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The boards of Aditya Birla Nuvo Ltd (ABNL) and Grasim Industries today approved a composite scheme of arrangement between the two firms and ABFSL.
