Aditya Birla Nuvo will merge with Grasim under a grand plan stitched by the Aditya Birla Group management to beef up shareholder value but worried Grasim investors continued to sell shares of the firm for the second successive day fearing the plan would stretch its balance sheet and dilute focus.
Kumar Mangalam Birla, whose great grandfather Ghanshyam Das Birla started Grasim 10 days after India's Independence in August 1947, announced the merger on Thursday , terming it a major play on the India growth story . He said the proposal would simplify group cross-holdings and deliver value from a diverse range of businesses to shareholders.
The financial services business of Nuvo (ABNL), held separately under three different companies, would be demerged and listed, said Birla, chairman of the group. “Grasim's shareholders are also getting exposure to financial services and telecom and the listing of ABFSL (Aditya Birla Financial Services) gives them ample scope of value unlocking,“ he added.
The combination of Nuvo and Grasim would create a company with a combined market cap of Rs.62,767 crore and a turnover of around Rs.59,766 crore with operating earnings of Rs.11,961 crore.
Aditya Birla Nuvo, formerly called Indian Rayon & Industries, will cease to exist after the merger. All financial services businesses, including insurance and payments bank, will be listed on stock exchanges. Aditya Birla Financial Services is currently a 100% subsidiary which houses the non-banking financial company, housing finance, asset management, general insurance advisory, private equity, broking and wealth businesses, among others. The life insurance JV -Birla Sun Life Insurance -is however held independently under Nuvo as a separate venture.
The listing of financial services is expected to benefit shareholders of both Nuvo and Grasim as rapid retail credit growth and a boom in insurance policies has turned private sector banks and NBFCs into stock market darlings. Nuvo also owns 23.3% in Idea Cellular, the separately listed telecom venture, and 9% in Aditya Birla Fashion & Retail as of the past financial year. The merged entity will own 28% in Idea.
The listed financial services company will be 57% owned by post merger Grasim and the balance by post-merger Grasim shareholders on a proportionate basis. The promoters led by Birla himself will own 17% of the company. Birla hinted that he is open to bringing in partners -both financial and strategic -to grow the financial services business even further but warned that nothing is concrete as yet.
Each shareholder of AB Nuvo will get three new equity shares in Grasim for every 10 equity shares held in Nuvo. That means a share holder having 100 shares in AB Nuvo will receive 30 shares in Grasim. Similarly, for the demerger of the financial services business, each shareholder of Grasim (postmerger) will receive 7 equity shares in Aditya Birla Financial Services for every equity share held in Grasim. That means a shareholder with 100 shares in Grasim will receive 700 shares in Aditya Birla Financial Services. In aggregate, each shareholder of Aditya Birla Nuvo holding 100 shares will receive 30 shares in Grasim and 210 shares in Aditya Birla Financial Services. The listing is planned for May-June next year.
DSP Merrill Lynch, PwC, Kotak Mahindra Capital and JM Financial advised the various AB Group companies and also helped in the valuation exercise and independent fairness opinion. Khaitan & Co and Cyril Amarchand Mangaldas were the legal advisers.
Grasim Industries started as a textile manufacturer in 1948. Currently, its core businesses are viscose staple fibre and cement, which contribute over 90% of its revenue and operating profit. The group's cement business was split between Indian Rayon (now Nuvo) and Grasim in the 1990s before it was shifted completely to Grasim, which in turn got merged with UltraTech. Following its merger with Aditya Birla Chemicals last February, Grasim has been positioned as a conglomerate.
Kumar Mangalam Birla, whose great grandfather Ghanshyam Das Birla started Grasim 10 days after India's Independence in August 1947, announced the merger on Thursday , terming it a major play on the India growth story . He said the proposal would simplify group cross-holdings and deliver value from a diverse range of businesses to shareholders.
The financial services business of Nuvo (ABNL), held separately under three different companies, would be demerged and listed, said Birla, chairman of the group. “Grasim's shareholders are also getting exposure to financial services and telecom and the listing of ABFSL (Aditya Birla Financial Services) gives them ample scope of value unlocking,“ he added.
The combination of Nuvo and Grasim would create a company with a combined market cap of Rs.62,767 crore and a turnover of around Rs.59,766 crore with operating earnings of Rs.11,961 crore.
Aditya Birla Nuvo, formerly called Indian Rayon & Industries, will cease to exist after the merger. All financial services businesses, including insurance and payments bank, will be listed on stock exchanges. Aditya Birla Financial Services is currently a 100% subsidiary which houses the non-banking financial company, housing finance, asset management, general insurance advisory, private equity, broking and wealth businesses, among others. The life insurance JV -Birla Sun Life Insurance -is however held independently under Nuvo as a separate venture.
The listing of financial services is expected to benefit shareholders of both Nuvo and Grasim as rapid retail credit growth and a boom in insurance policies has turned private sector banks and NBFCs into stock market darlings. Nuvo also owns 23.3% in Idea Cellular, the separately listed telecom venture, and 9% in Aditya Birla Fashion & Retail as of the past financial year. The merged entity will own 28% in Idea.
The listed financial services company will be 57% owned by post merger Grasim and the balance by post-merger Grasim shareholders on a proportionate basis. The promoters led by Birla himself will own 17% of the company. Birla hinted that he is open to bringing in partners -both financial and strategic -to grow the financial services business even further but warned that nothing is concrete as yet.
Each shareholder of AB Nuvo will get three new equity shares in Grasim for every 10 equity shares held in Nuvo. That means a share holder having 100 shares in AB Nuvo will receive 30 shares in Grasim. Similarly, for the demerger of the financial services business, each shareholder of Grasim (postmerger) will receive 7 equity shares in Aditya Birla Financial Services for every equity share held in Grasim. That means a shareholder with 100 shares in Grasim will receive 700 shares in Aditya Birla Financial Services. In aggregate, each shareholder of Aditya Birla Nuvo holding 100 shares will receive 30 shares in Grasim and 210 shares in Aditya Birla Financial Services. The listing is planned for May-June next year.
DSP Merrill Lynch, PwC, Kotak Mahindra Capital and JM Financial advised the various AB Group companies and also helped in the valuation exercise and independent fairness opinion. Khaitan & Co and Cyril Amarchand Mangaldas were the legal advisers.
Grasim Industries started as a textile manufacturer in 1948. Currently, its core businesses are viscose staple fibre and cement, which contribute over 90% of its revenue and operating profit. The group's cement business was split between Indian Rayon (now Nuvo) and Grasim in the 1990s before it was shifted completely to Grasim, which in turn got merged with UltraTech. Following its merger with Aditya Birla Chemicals last February, Grasim has been positioned as a conglomerate.
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