India: Grasim, Aditya Birla Nuvo to consider merger, listing of financial business

Visual from Aditya Birla Nuvo website.

The boards of Grasim Industries Ltd and Aditya Birla Nuvo Ltd, which are meeting on Thursday to review their June quarter earnings, will also consider a multi-phase restructuring plan involving the merger of the two firms and listing of the financial services business by way of a part demerger, according to two people close to the development.

The Kumar Mangalam Birla-controlled Aditya Birla Group has been trying to restructure its business for the past five years and list its financial services division as a separate entity.

Currently, its financial services business, such as life insurance and mutual funds, are housed under Nuvo.

CNBC reported this first on Tuesday.

On Wednesday, shares of Aditya Birla Nuvo dipped 4.07% to close at Rs.1,512.75 apiece on BSE, while benchmark Sensex lost 1.1% to end at 27,774.88 points. Grasim Industries also fell—losing 6.1% to close at Rs.4,851.50 per share.

According to the two people cited above, Aditya Birla Group is examining the option of a mega merger of two big companies in the current financial year to create a stronger holding company after consolidating its garments business into a single entity last year.

“The plan is to merge Grasim Industries and Aditya Birla Nuvo to create a stronger holding company so as to unlock shareholders’ value and strengthen the balance sheet for the next level of growth. This will result in listing of financial services as an entity while it further strengthens the existing listed entities,” one of the two people said.

An Aditya Birla Group spokesperson declined comment, saying the firm does not respond to market speculation. She added that both Grasim Industries and Aditya Birla Nuvo boards are meeting to consider their June quarter earnings. “…we wish to inform you that we constantly evaluate various options for creating long-term value for shareholders,” Grasim Industries said in a note to BSE, which sought a clarification on media reports.

“As and when such proposals are considered and approved by the board, we notify the stock exchanges with all relevant details as required. At this point of time, no such proposals have been considered or approved by the board, which would trigger the disclosure of events or information,” the company said.

Grasim Industries is a flagship company of Aditya Birla Group and has four business verticals including viscose staple fibre, cement, chemicals and textiles. In 2015-16, it reported consolidated revenue of Rs.36,217 crore.

Aditya Birla Nuvo has business divisions such as life insurance, financial services and also telecom through its 24% stake in Idea Cellular Ltd.

“The deal is certainly happening. The company is exploring several options including merging two companies or demerging some of the businesses. The investment bankers are working on swap ratios. Nothing has been finalized yet,” the second person said.

The company is also deliberating a separate plan for its life insurance business, this person said. He declined to disclose details.

Restructuring businesses to unlock shareholder value is not new for Indian corporate entities. In July, Ajay Piramal’s financial services business was restructured and integrated into a larger entity as a prelude to a spin-off of the unit and Piramal Enterprises’s healthcare business.

This article was first published on Livemint.com

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.