The Aditya Birla group on Thursday approved a proposal to merge two of its large group companies, Grasim and Aditya Birla Nuvo, to create a consolidated entity with revenue of about ₹60,000 crore that would, according to chairman Kumar Mangalam Birla , be a play on the India growth story.
Largely aimed at simplifying the group structure and aligning similar businesses, the merger will also lead to the financial services company being hived off into a separate company, Aditya Birla Financial Services, which will be listed on the exchanges.
Under the swap ratio, each shareholder of Aditya Birla Nuvo will get 3 new shares of Grasim for every 10 shares of Nuvo that they hold. The de-merger of the financial services business will result in Grasim shareholder receiving seven equity shares for every share held in Grasim. A shareholder with 100 shares of Grasim would thus get 700 shares in Aditya Birla Financial Services.
The restructuring will be in two stages — merger of Aditya Birla Nuvo into Grasim and upon implementation of the merger, demerger of its financial services business resulting in a listed financial services company with 57% owned by post-merger Grasim. The balance of the shareholding in the financial services company will be held by post-merger Grasim shareholders on a proportionate basis.
“It is a good mix of businesses, more like a slice of India,” Birla said while announcing the merger. “There is a large part of manufacturing, there are services, there are fast growing businesses and there are some which are more stable. Similar businesses have come together.”
The new consolidated Grasim will house 68% of manufacturing, while services will account for 32%. More than 70% of the revenue will come from fast growing businesses such as financial services, telecom and cement.
The restructuring will create one of India’s largest well-diversified companies with a healthy mix of businesses with steady cash flows and long-term growth opportunities, said Birla. “The demerger and listing of the financial services business will unlock value for shareholders,” he added.
The transaction, subject to the customary statutory and regulatory approvals including approvals of the courts, the stock exchanges, Competition Commission of India and shareholders and creditors of each of both companies, is expected to be completed by the last quarter of this financial year or the subsequent quarter, the two companies said in a statement.