The requisite 75 percent voting in favour of the special resolution from the minority shareholders was received after the group decided to merge its cash-guzzling telecom business, Idea Cellular with Vodafone on March 20th that would make it India’s largest telecom player with 40 percent market share. Grasim shareholders, who own 68.7 percent stake in the company, were concerned that following the merger with Nuvo, its cash would be used to fund Idea Cellular’s operations.
With the group holding 26 per cent stake in Idea-Vodafone merged entity, the risks are far lower, said an institutional investor. Some investors voted against the proposal but their shareholding was minuscule.
Since the merger has been announced in August, shares of Grasim are up 18 per cent while Nuvo shares are down by 1.48 percent as of today. The BSE Sensex is up 7.4 percent during the same period.
Post-merger, the promoters would own 60 percent share in the “new Grasim” even as the financial services business of Nuvo would be de-merged to be listed on the Indian stock exchanges separately.
The merger had come under fire as shareholders proxy advisory firms had said the merger is not in the interest of minority shareholders. In their recommendation to the minority institutional shareholders, the proxy advisory companies like InGovern had said the companies are being merged so as to help promoters to exert more control while having to make lesser direct equity investment. IIAS had said Grasim’s already diversified business was saddled with more complexities.
But in a recent interview to this newspaper, Chairman of Aditya Birla group, Kumar Mangalam Birla had said the shareholders of group companies have gained following the M&As. “The management has taken hundreds of hours to set these deals and it would take markets some time to grasp these complex deals,” he had said. The group officials also met large investors of Grasim and Nuvo to apprise them about the benefits of the merger.
InGovern said the Birlas must work towards simpler shareholding structures by completely eliminating cross-holdings and layering where the promoter holds interests through multiple holding companies. It said the Birla group promoter holdings is structured in such a way that they exercise maximum control and voting powers with minimum actual equity stake. The group has seven listed entities – Grasim Industries, Aditya Birla Nuvo, Hindalco, Idea Cellular, Ultratech Cement, Aditya Birla Money and Aditya Birla Fashion & Retail. There are many cross holdings between these companies which effectively has increased the promoters stake in each of the companies while the ‘true’ beneficial interest is quite lower in many cases.
The voting shows that the minority shareholders have shrugged off these concerns.
Mega merger
