Companies & Sectors
Grasim-Aditya Birla Nuvo merger: Difficult to remove cross linkages
On 12 August 2016, the Aditya Birla Group announced the merger of its two holding companies, Aditya Birla Nuvo Ltd (ABNL) and Grasim Ltd. As part of the restructuring, the financial services arm, Aditya Birla Financial Services (ABFS), will also be subsequently demerged and listed separately. However, the merger really does not streamline the businesses by removing all cross linkages, says a report.
 
In a report, proxy advisory firm Institutional Investor Advisory Services (IiAS), says, "Across the group, the promoter family’s control over the listed companies has been higher than its direct shareholding – an arrangement typically seen in the Indian markets of the 1970s. The current transaction lends itself to yet another of those structures."
 
"One of the stated drivers of the proposed transaction is simplifying this group structure. However, this is true only to a limited extent. There will be some consolidation of promoter stakes across group companies; but the merger really does not streamline the businesses by removing all cross linkages," it added.
 
The KM Birla Group has a complex holding structure, with cross holdings between multiple group companies. A large part of this is due to legacy issues, some of the newer companies, including Ultratech Cements, Idea Cellular and Aditya Birla Fashion & Retail (ABFRL) have relative cleaner ownership structures.
 
 
Post-merger, Grasim will be a conglomerate comprising a diverse set of unrelated businesses. Thus, Grasim is taking a step towards positioning itself as the Birla group’s holding company. "This raises uncertainties on capital allocation, and it will become difficult to value the company correctly. Therefore, the market is likely to punish the stock with a higher holding company discount," IiAS says.
 
 
According to the proxy advisory firm, the scheme (of merger) will give the promoter group almost 74% effective ownership of the financial services business or ABFS, once it lists. Had ABFS been demerged before merging Grasim, its shareholding would have mirrored that of ABNL’s. In such circumstances, the promoter group would have owned just 58.4%, it added.
 
Over the last 15 years, the promoters of KM Birla group have steadily increased their stake in most of the listed companies in the group. This is part of the group’s stated strategy of boosting the promoter shareholding in the flagship entities like ABNL, Grasim, IDEA, Hindalco and Ultratech. 
 
 
In May 2004, KM Birla had mentioned that he wanted to shore up the promoter holding to 30%. This was accomplished by December 2010, through a series of restructurings, creeping acquisitions and preferential allotments. This threshold was raised and in October 2011, Mr Birla stated that he wanted to increase the promoter holding to 40%. This has also largely been achieved, except in Grasim where the promoter stake is currently 31.3%. "The proposed merger will increase the promoter holding to 39% - just a breath away from the 40% target. Table below shows how promoters have increased stake in the listed group companies over the past 10 years," IiAS says.
 
 
According to the proxy advisory firm, there is a discernible pattern in the way the shareholding in KM Birla group has been increased, especially between 2000 and 2007, the preferred mode was creeping acquisitions. From 2008 onwards, the stake increased mostly through preferential allotments of shares and warrants. In 2015-16, and with the proposed transaction, the preferred mode to increase shareholding is through corporate restructurings.
 
However, at the same time, the Birla group’s predilection for preferential allotments during the 2007-2014 years has diluted minority shareholders significantly. For example, in ABNL, between 2007 and 2014, promoter shareholding went up from 40.5% to 57.2% through preferential allotments, resulting in minority shareholders’ dilution by 28%.
 
"Once again, through the ABNL merger, Grasim’s minority shareholders will get diluted by 29%, but promoters will have achieved their target of holding 40%. Grasim will be a bigger company, but its shareholders get exposed to the financial services and telecom businesses, which are capital-intensive and, given the competitive landscape, likely to remain cash hungry. Shareholders need to ask themselves: is it worth it," IiAS questioned.

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COMMENTS

Sanjeev Dighe

9 months ago

Request to clariey the following
GRASIM share is getting split to Rs 2 facevalue.
Whether AB Nuvo will also get the same, means 3 GRASIM shares x 5 _ 15 Grasim shares
and then 15 nos x 7 ABFS shares _ 105 shares of ABFS

100 ABNuvo shares ----- 150 GRASIM and 1050 ABFS

Also let me know the tentative dates for the above two conversion

Thanks

--- SANJEEV

R Balakrishnan

9 months ago

This group and corporate governance seem to be like two sides of a coin. Never shall one see the other

Despite sporting glory, Indian women struggle to rise
In the 2016 Rio Olympics, shuttler P.V. Sindhu became the first Indian woman to win a silver medal; Sakshi Malik the first Indian female wrestler to win a medal (bronze), gymnast Dipa Karmarkar became the first Indian woman to feature in a gymnastics final, finishing fourth in the vault, and Lalita Babar became the first Indian woman to enter a 3,000 metre steeplechase final, finishing 10th. Eighteen-year-old Aditi Ashok -- the youngest golfer from India -- also entered the final round of the women's individual golf event.
 
Women saved the day for India at Rio, and their growing presence was reflected in the 54 female Indian athletes -- the largest number ever -- at an Olympiad.
 
While those rising numbers indicate the progress made by Indian sportswomen -- many from small towns and poor families -- in particular, and Indian women in general, a quick look at five key parameters -- working women, education, maternal health, age of marriage and abortion rates-reveals that India's women are routinely denied opportunities at education, work and even being born. 
 
1. Working women: Lowest in BRICS, 25 million women leave workforce over a decade
 
Women's workforce participation in India is the lowest among BRICS nations. A host of other countries, such as Bahrain (39%), Malaysia (45%) and Somalia (37%), do much better, as IndiaSpend reported in March 2015, using World Bank data from 2014.
 
No more than 26% of India's women in India participated in the workforce, according to a 2013 Labour Bureau report. The rate improved to 27% in 2014, according to a 2015 International Monetary Fund (IMF) study that IndiaSpend reported in July 2016. This is a decline of up to 8% percentage point over 14 years; in 1999, up to 34% of women were a part of India's workforce.
 
2. Higher education: More women enrolled, outperform men, but drop out later 
 
While more young women are enrolled in higher education than ever before -- and apparently more successful in clearing 10th-standard board exams than young men-they are either marrying early or not finding or not looking for jobs, according to an IndiaSpend analysis of various data.
 
The enrolment of girls in higher education increased from 39 per cent to 46 per cent from 2007 to 2014, but as data above show, female participation in India's labour force declined to a low of 27% in 2014 from 34% in 1999.
 
Almost 12 million women are enrolled in undergraduate courses, but few continue to professional courses; 600,000 women were enrolled for diploma courses, according to 2013 data, the latest available. Even fewer women sign on for PhDs and only 40% of PhD candidates are female.
 
In 2016, girls were more successful than boys in clearing 10th-standard exams of a national education board, a trend that has held over seven years, we reported.
 
3. Maternal Health: Best ever, but worse than poorer countries
 
India's maternal mortality ratio was 167 in 2010-12, according to the latest government data available, a steady improvement.
 
India's maternal mortality ratio -- 174, according to World Bank estimates -- is worse than countries in the neighbourhood, such as Sri Lanka (30), Bhutan (148) and Cambodia (161).
 
India does worst among the BRICS countries: Russia (25), China (27), Brazil (44), and South Africa (138); according to the World Bank's latest estimates, which differ somewhat from Indian sources' 167 but confirm the trends.
 
4. Median age of marriage: Rising, but 61% married before 16
 
The average Indian woman is married at 21.2 years, according to Census 2011, an improvement from 19.3 years in 1990, according to a government report.
 
The mean female age at marriage in rural areas is 20.7; in urban areas, 22.7, according to the latest census data from 2011.
 
While education is an efficient contraceptive -- Indian women with a college degree have 1.9 children during their lifetime, against 3.8 for illiterate woman -- it appears to only marginally slow the inevitability of early marriage.
 
Nearly 12 million Indian children were married before the age of 10 years, as IndiaSpend reported in June 2016; 7.84 million (65 per cent) married children were female, reinforcing the fact that girls are significantly more disadvantaged. Eight in 10 illiterate children who were married were also girls.
 
Also, as many as 1,403 females never attended any educational institution for every 1,000 males who have not, IndiaSpend reported in November 2015.
 
5. India's missing girls: Child sex ratio lowest in 60 years
 
India's child sex ratio is the worst in 60 years, indicating that girls continue to be aborted, killed or otherwise fatally neglected.
 
If India's child sex ratio does not improve, there will be 23 million fewer women (aged 29-40) than there should be by 2030, according to a United Nations Population Fund projection.
 
Sex selection was introduced in India to control population growth, based on the premise that since girls are hardier, all else being equal, more survive childbirth than boys. In 1975, a paper in the journal Indian Paediatrics argued that this excess of girls was “unnecessary fecundity and that elimination of girls would lead to population control”, wrote Sabu M. George -- a member of a committee to monitor a 1994 law that banned sex selection -- in his February 2016 Indian Express column.
 
But despite the law, rising education levels -- and more female role models, such as India's latest Olympian medallists -- the child sex ratio continues to fall.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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Clinton e-mail scandal: FBI discovers 15,000 more e-mails
The FBI has discovered almost 15,000 unrevealed documents linked to the e-mail scandal surrounding Democratic presidential nominee Hillary Clinton, US media reports said on Monday.
 
The documents were found during the FBI investigation into Clinton's use of a private e-mail server while she was Secretary of State between 2009 and 2013, Efe news reported.
 
Some 30,000 documents linked to the scandal were already turned over by Clinton's attorneys to the Department of State in 2014.
 
The State Department has promised to publish the documents and on Monday assured federal Judge James E. Boasberg, who is hearing the case, that the department is "giving priority" to reviewing the new e-mail messages.
 
However, it is still not known if the e-mails will be published before the Nov 8 election, in which the former first lady is contesting against Republican presidential nominee Donald Trump.
 
The e-mail controversy erupted in early 2015, when US media revealed that during her four years heading the State Department, Clinton always used a personal -- and not an official -- account for her communications, including a private server, Efe news added.
 
Clinton acknowledged at the time that it would have been "smarter" to use an official account and handed over for publication 55,000 pages of e-mails from her tenure at the State Department, but the case raised questions about whether classified government information was improperly handled on her personal account.
 
The State Department identified around 2,100 e-mails from Clinton's server as confidential, although it said that many of them were not considered classified at the time they were sent, but had been designated as such during the review.
 
The scandal also brought accusations from Republican lawmakers about Clinton's handling of the 2012 attack on the US Consulate in Benghazi, Libya, in which then-Ambassador Chris Stevens and three other US government officials died.
 
Several months ago, Clinton appeared before Congress for more than 11 hours to explain what occurred during that attack, and in early July the lawmakers' final report on the incident was made public, a report that concluded that no evidence incriminating her had been found.
 
Thus, later in July the FBI recommended to the Department of Justice that no charges be filed against the Democratic candidate after the e-mail investigation, and Attorney General Loretta Lynch followed that advice and closed the case.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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