12 February 2015
The swap ratio approved by the board is 1 share of Grasim for every 16 shares of Aditya Birla Chemicals
P R Sanjai and Amritha Pillay
Mumbai: Grasim Industries Ltd, the flagship company of the Aditya Birla Group, has decided to merge Aditya Birla Chemicals (India) Ltd, or ABCIL, with the company.
In a filing to stock exchanges, Grasim Industries said its board on Wednesday approved the proposed merger of ABCIL with Grasim. The swap ratio approved by the board is 1 share of Grasim for every 16 shares of ABCIL.
Grasim will issue 1.46 million new shares.
Consolidation is in line with the group's philosophy to unify similar businesses in one firm
The proposed merger will consolidate Aditya Birla Group’s chlor-alkali business into Grasim and strengthen the existing portfolio of viscose staple fibre, caustic soda and allied chemicals in the stand-alone company, the company said.
“The merger will enable the geographical diversification for Grasim through the addition of ABCIL’s manufacturing facilities spread across the country. It also enables the business to capitalize growth opportunities by bringing in operational and financial synergies, backed by Grasim’s strength,” the statement added.
The consolidation is in line with Aditya Birla Group’s philosophy to unify similar businesses in one company, the statement said.
Grasim is a manufacturer of caustic soda in India, with an installed capacity of 452,500 tonnes per annum. It has plants at Nagda in Madhya Pradesh and a recently-commissioned one at Vilayat in Gujarat.
ABCIL reported a net profit of Rs.3.4 crore in the December end quarter, against Rs.16.35 crore in the same period a year ago. The company in its statement to BSE said the numbers are not fully comparable due to certain acquisitions made in the last financial year.
The total debt on ABCIL’s books is a little less than Rs.1,000 crore, which would not be transferred to Grasim’s books. As per Bloomberg data, Grasim Industries Ltd consolidated net debt was at Rs.5,327.59 crore and standalone was at Rs.39.04 crore as on 30 September 2014.
“ABCIL is held through Hindalco (51%), Renuka
Investments (3.31%) and Pilani Investments (1.67%).
Grasim does not have a stake currently. At a quarter
against Rs.126.09 crore in the same period last
year, down by 26%. Adesh Kumar Gupta, chief financial
officer, Grasim Industries, said the merger will
raise Grasim’s caustic soda capacity from
the current 452,500 tonnes to around 748,000 tonnes.
“With certain other capacity addition, the
total caustic soda capacity eventually would be
around 804,000 tonnes.”
Gupta expects the merger with ABCIL to improve margins for Grasim Industries. “Margins for ABCIL have been in the above 24% range due to a better cost structure, higher than the 18% margins reported by Grasim’s chemicals division,” he said.
Aditya Birla Chemicals India Ltd gained 1.59% to close at Rs.223.20 on Wednesday on the BSE, while the benchmark Sensex gained 0.63% to close at 28,533.97 points and shares of Grasim Industries Ltd gained 0.48% to close at Rs.2,835.85 per share. The merger was announced after market hours on Wednesday.