Aditya Birla Nuvo (ABNL) shares tanked over 20 per cent in early trade on Friday after Aditya Birla Group finalised its plans to merge ABNL with Grasim Industries and hive off its financial services business into separate entity. Under the plans, shareholders of Aditya Birla Nuvo will receive three new equity shares of Grasim for every 10 equity shares.
At 9.31 am, shares of ABNL were trading 20 per cent down at Rs 1259.35. The scrip opened the day at Rs 1409.15 and has touched a high and low of Rs 1409.15 and Rs 1180, respectively, in trade so far. Grasim Industries was also trading 2.84 per cent down at Rs 4410 at the same time. Shares of Grasim opened the day at Rs 4484 and has touched a high and low of Rs 4484 and Rs 4160, respectively, in trade so far.
Shares of the Aditya Birla Nuvo ended 17.60 per cent down at Rs 1290.15, while Grasim Industries settled 0.57 per cent up at Rs 4565.
Kumar Mangalam Birla, chairman, Aditya Birla Group in a release said, “The proposed 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. With diverse business spanning manufacturing and services, the combined entity provides a play on India’s growth story. The demerger and listing of the financial services business will unlock value for shareholders.”
The merger is likely to be finalised by the first quarter of the next finanical year, while the financial services business will be listed by June 2017. The transaction is subjected to necessary approvals from the shareholders, court and other regulatory agencies.
According to Sharekhan, the share swap ratio (3 shares of Grasim for every 10 shares of ABN) is at a 10 per cent discount to the current valuation of ABNL’s equity as on August 11. Post the proposed restructuring and proposed listing of Aditya Birla Financial Services (ABFS), Grasim would hold a 57 per cent stake in ABFS, while ABN shareholders would own a 30 per cent stake in ABFS (13 per cent via direct exposure through share issue and 18 per cent indirect exposure through holding in Grasim). The key asset in ABN is the fast-growing financial services business (100 per cent owned by ABN) and stake in Idea Cellular (23 per cent held by ABN). Post the restructuring, the ABN shareholders would get an exposure to Grasim’s cement business but their direct stake in ABFS will decline to just 13 per cent. The brokerage house advise investors to hold on to ABN, and for any further exposure to the financial services business, Sharekhan advise to buy Grasim.
Aditya Birla Nuvo on Thursday also posted 56.79 per cent fall in consolidated net profit to Rs 305.15 crore for the first quarter ended June 30, 2016 against Rs 706.23 crore in the same quarter last year. On the other hand, Grasim Industries reported 63.56 per cent rise in net profit at Rs 830.22 crore for the quarter ended June 30, 2016 against net profit of Rs 507.60 crore in the corresponding quarter a year ago.