AV Birla Group’s financial services arm Aditya Birla Capital is being taken public today (1 September) by listing on BSE and NSE, in a rare instance of a company getting listed on the stock exchanges without an IPO for sale of equity shares. Aditya Birla Group said in a statement this week that the IPO-less listing for its financial services business unit is the culmination of the composite scheme of arrangement, under which Aditya Birla Nuvo was merged with Grasim Industries, while its financial services business was spun off into a new company called Aditya Birla Capital. The newly-formed Aditya Birla Capital is now the holding company of the financial services businesses of the Aditya Birla Group.
The listing of ABFS is part of a restructuring the $41 billion conglomerate started earlier this year. Birla decided to merge Aditya Birla Nuvo with Grasim, both of which served as holding companies for the group’s various businesses. Simultaneously, the group decided to spin off Nuvo-owned financial services business as a separate listed entity in an effort to unlock value. According to the scheme of arrangement, Grasim Industries issued its three shares every 10 shares held in Aditya Birla Nuvo.
Following this, the investors in Grasim were given seven shares of Aditya Birla Capital for every one equity share owned. The swap ratio ensured that Grasim Industries investors now own 25 per cent of Aditya Birla Capital. Post merger, the promoters’ holding in Grasim Industries will increase to 38.8 per cent from 31.3 per cent and it will be 57.2 per cent in the financial services company. Shareholders of both Grasim Industries and Aditya Birla Nuvo had approved the merger deal earlier this year.
The newly formed Aditya Birla Capital Ltd has business interest in life insurance, asset management, private equity, corporate lending, structured finance, general insurance broking, wealth management, equity, currency and commodity broking, online personal finance management, housing finance, pension fund management and health insurance.
IPO-less listing is a rare phenomenon in India, save for SMEs and startups wishing to list on the BSE SME exchange. Capital markets regulator SEBI has put in place certain norms for companies which desire to take the direct listing route. Indian rules allow a company to be directly listed without an IPO, just that it has to meet the requirement of minimum 25% public shareholding beforehand.
The company concerned must issue its shares to the shareholders of a listed entity under a scheme of reconstruction or amalgamation, approved by one of the High Courts. In such cases, shares begin trading on the bourses without being preceded by an IPO. Thus, the existing shareholders are free to sell their shares, and public investors are free to buy those shares, in the secondary market itself. Aditya Birla Capital meets this requirement, as the public holds 25.6% of its shares.
Elsewhere, in the United States, the popular streaming service Spotify, which has taken the online music industry by storm, reportedly plans to soon list on the New York Stock Exchange without an IPO. Just like India, the US regulations too allow for direct listing of companies on stock exchanges.