On June 1, 2017, The Hon’ble National Company Law Tribunal (“NCLT”) bench at Ahmedabad, have approved the merger of Aditya Birla Nuvo Ltd. (“ABNL”) and Grasim Industries Ltd. (“Grasim”), to be followed by the listing of Aditya Birla Financial Services Ltd (“ABFSL”).

APPOINTED DATE

Since the appointed date was effective date, filing of the certified copy of the order with ROC 1st July 2017 on which date the company will be deemed to have complied with. Therefore, 1st July 2017 will be Effective date and appointed date for effectiveness of merger of ABNL with Grasim. So ABNL shall stand transferred to and vested in Grasim with effect from the effective date as a going concern. And 4th July 2017 will be Effective date and appointed date for effectiveness of Demerger of financial services from Grasim to ABFSL.

But to note is that the shareholder of ABNL will be become shareholders of Grasim and ABFSL, therefore they will be part of AGM of the Grasim and ABFSL respectively. With said the management should also initiate and made available separate financial of ABNL for shareholder’s view or approval.

FIXATION OF RECORD DATE

The merger committee of the board of directors of Grasim Industries Limited has fixed 6th July 2017 and 20th July 2017 as the record date for merger and demerger respectively.

SPLIT OF SHARE AND SWAP RATIO

Before the approval of the scheme Grasim has split share from Rs. 10 each to Rs. 2 each which has resulted into in adjustment to Share Exchange Ratio

Earlier Adjusted Swap ratio
For merger of ABNL with Grasim, each shareholder of ABNL will get 3 equity shares of Grasim for every 10 equity shares held in ABNL. For merger of ABNL with Grasim, each shareholder of ABNL will get 15 equity shares of Grasim for every 10 equity shares held in ABNL.
For de-merger of Financial Services business into ABFSL, each shareholder of Grasim (Post-merger) will receive 7 equity shares in ABSFL for every 1 equity shares held in Grasim. For de-merger of Financial Services business into ABFSL, each shareholder of Grasim (Post-merger) will receive 7 equity shares in ABSFL for every 5 equity shares held in Grasim.

Please Note: There will be improvement in Liquidity due to Sub-divided equity shares from one (1) equity share of face value of Rs. 10 each fully paid up to five (5) equity shares of face value of Rs. 2 each fully paid up in Grasim.

PROMOTERS STAKE

The promoters increased stake in Aditya Birla Nuvo Limited by 4.37% from 58.39% to 62.76%, which will lead to simultaneously increase stake in Grasim and ABFSL post-merger. Grasim earlier stake was 38.82% will increase to 40.10% and allotment of 11,97,000 Equity shares in ABFSL will increase promoters stake by 0.56% i.e. 75% including Grasim.

Particulars Figure
Amount Invested by Promoters in ABNL post Scheme announcement (Crores) 774.74
Share Purchased pursuant above investment by Promoters in ABNL 57,00,000
Share will be allotted based on Swap ratio in Grasim for this additional investment 85,50,000
Share that could have been acquired based on Grasim share price as on 30.12.2016 89,98,139
Additional Shares would have been acquired in Grasim with direct Investment 4,48,139
Market Price of Grasim as on 23.06.2017 1,155
Lower value for promoters for stake acquired (Crores) 51.76

Please Note: If promoters would have directly acquired shares in Grasim then they would also get additional 6,27,395 Equity shares of AFSPL.

Table 1: Shareholding of Grasim Post Merger of ABNL and ABFSL

Particulars Grasim ABFSL (earlier) ABFSLPost acquisition by promoters
%age %age %age
Grasim 57.30% 57.30%
Promoters 40.10% 17.10% 17.70%
Public 59.90% 25.60% 25.00%
Total 100.00% 100.00% 100.00%

MARKET PRICE MOVEMENT

Particulars Aditya Grasim Ratio
Market Price as on 11.08.2016 considering split 1,565 907 17.25: 10
Market Price as on 12.08.2016 considering split 1,300 913 14.24: 10
Market Price as on 23.06.2017 considering split 1,746 1,174 14.87: 10
Change in Price from announcement 11.57% 29.44%

On the date on announcement Aditya Birla was overpriced therefore immediately after the date of announcement, Aditya Birla collapsed to streamline with swap ratio.

All the business (Gulf Fertiliser, Indian Rayon, Insulators, Jayshree, Finance and telecom) of Aditya Birla Nuvo had negative growth & lower margin and as compared to FY 2016, except for Financial Services Business. Whereas all business (Cement, VSF and Chemical Business) of Grasim has shown growth with improvement in margin as compared to FY 2016. Therefore, the has been considered in arriving at swap ratio for amalgamation.

VALUATION

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