K M Birla hikes stake in A B Nuvo; Grasim merger in offing

Kumar Mangalam Birla, promoter of the Aditya Birla Group, has increased his shareholding in Aditya Birla Nuvo by purchasing shares from minority investors, including 3.86 per cent from rival Anil Ambani-owned Reliance Mutual Fund, for Rs775 crore, said an Economic Times report.

Aditya Birla Nuvo is to be merged with Grasim Industries, the report said citing sources.

The stake purchases, which boosted Birla's holdings to 62.77 per cent from 58.39 per cent, invited criticism from proxy advisory firms and local investors, who said it was against the interests of minority shareholders, the ET report says.

Reliance MF, the second-largest shareholder after Life Insurance Corporation of India, sold almost its entire stake. Birla's unlisted private firms Turquoise Investments & Finance and IGH Holdings bought about 57 lakh shares between December 2016 and January 2017. Apart from Reliance Mutual Fund, the identity of the other sellers could not be ascertained.

The stake purchases are a message to investors that Birla is bullish on prospects of the company after concerns were raised that the transaction was aimed at raising his holdings in the merged entity.

An Aditya Birla Group official said the acquisition is part of its plan to increase shareholding in group companies under the creeping acquisition route allowed by the Securities & Exchange Board of India. Guidelines say a promoter can increase shareholding by purchasing shares from the bourses.

Birla said the merger will make Grasim one of India's largest diversified companies with a healthy mix of business with steady cash flows and long-term growth opportunities. ''It will also simplify cross-holdings between group companies and play on India growth story with both manufacturing and financial services.''

The merger plan includes listing the financial services company, with Grasim owning 57 per cent, the promoters 16.6 per cent and the public the rest.