Mergers & Apprehensions

While the Grasim-Nuvo merger is expected to unlock value in the financial services business of the Aditya birla Group, concerns remain for Grasim’s minority shareholders.

- Salil Panchal

The Aditya Birla Group, in early August, announced a restructuring of its businesses wherein it will merge two of its main holding companies—Aditya Birla Nuvo (ABNL) and Grasim Industries.

The move comes just over a year after the group had, in May 2015, reorganised its fashion retail business by demerging Madura Fashion (the branded apparel retailing division) and Madura Lifestyle (the luxury branded apparel retailing division) from Nuvo and amalgamated them with Pantaloons Fashion & Retail, a listed arm of the group.

In the first stage of the current restructuring, the group plans to merge Nuvo with Grasim Industries, after which the group’s financial services business, Aditya Birla Financial Services (ABFS)— currently part of Nuvo—will be spun off and listed separately.to merge Nuvo with Grasim Industries, after which the group’s financial services business, Aditya Birla Financial Services (ABFS)— currently part of Nuvo—will be spun off and listed separately.

Grasim Industries is the flagship of the Aditya Birla Group, with business verticals such as viscose staple fibre, cement, chemicals and textiles. It has a 60 percent stake in Ultratech Cement. Nuvo, on the other hand, has business divisions such as life insurance, financial services and also telecom (through its 23 percent stake in Idea Cellular).

The purpose of this restructuring, according to group chairman Kumar Mangalam Birla, is three-fold: To consolidate the group’s fast growing businesses with a strong, stable cash flow; to unlock value for shareholders though the listing of the financial services business; and to simplify the group’s ownership structure.