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Five Things You Need To Know About Aditya Birla Nuvo-Grasim Merger

The merger will create a firm with a combined revenue of Rs 59,760 crore.

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When the Kumar Mangalam Birla-led Aditya Birla Group first announced its plan to merge Aditya Birla Nuvo Ltd. and Grasim Industries Ltd., shares of the two companies fell by more than 20 percent each. The stocks have since rebounded. Grasim gained 35 percent and Aditya Birla Nuvo jumped 85 percent over the last one year.

The merger is part of the group restructuring that also involves demerger of Aditya Birla Financial Services Ltd. With the shareholders approving the merger, the group now awaits approval of National Company Law Tribunal, market regulator Securities and Exchange Board of India, and the stock exchanges. Here are the top five things you need to know about the merger.

1. The Rationale

The merger will help consolidate fast-growing businesses, unlock value by demerging and listing the financial services arm, and to simplify the group structure by removing cross-holding.

2. The Swap Ratio

Following the merger, a shareholder will get three shares of Grasim for every 10 shares of AB Nuvo, and seven shares of AB Financial Services for every one share of Grasim.

3. The Structure

The promoters will own 39 percent in the combined entity and public shareholders will hold the rest.

Five Things You Need To Know About Aditya Birla Nuvo-Grasim Merger

The merger is aimed at simplifying the cross-holding structure. The combined entity will hold 28 percent in Idea Cellular, 11.4 percent in AB Fashions and 4.3 percent in Hindalco.

Five Things You Need To Know About Aditya Birla Nuvo-Grasim Merger

4. The Financials

The merged entity had a revenue of Rs 59,760 crore, an operating profit of Rs 11,900 crore and a profit after tax of Rs 2,300 crore in the year ended March 2016. Debt stood at Rs 50,340 crore while its net worth was Rs 46,570 crore.

5. The Demerged Entity

Aditya Birla Financial Services, which is among the top five fund managers in India (excluding Life Insurance Corporation), will be demerged and listed as a separate entity after the merger between AB Nuvo with Grasim.

Its assets under management more than doubled to Rs 1.84 lakh crore in the five years through March 2016, while its loan book grow nearly 15 times to Rs 27,700 crore.