Aditya Birla Group to list financial services unit in August

Mumbai: The Aditya Birla Group will list its financial services unit on the bourses in August, the conglomerate’s chief financial officer said.

Grasim, a group holding company which is being merged with Aditya Birla Nuvo BSE -1.58 %, will own a 57.3% stake in Aditya Birla Financial Services (ABFS) post listing. Chairman Kumar Mangalam Birla’s personal investment companies will hold another 17.1% stake and the rest 25.6% will be with the public. ABFS is currently a wholly owned unit of Nuvo and will become a part of Grasim BSE -1.82 % after the merger.

Grasim’s strong parentage will enable the financial services business to continue growth momentum and enhance its competitive advantage,” Sushil Agarwal told ET. “The listing of the financial services business will further enhance the shareholder value.”

Merrill Lynch is the investment banker for the listing transaction. After the listing, ABFS will look to a stake sale of up to 5% to raise funds for its nonbanking financial services and housing finance business. The plan already has shareholders’ approval.

We want to raise some money from a strategic partner who just does not give us finance. We will issue new shares and holdings of all shareholders will get diluted," Agarwal said. He did not speak about valuation.

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, and decided to spin off Nuvo-owned financial services business as a separate listed entity in an effort to unlock value.

Nuvo is a vehicle for the group’s new businesses like fashion and retail, telecom and financial services, while Grasim is the holding company for cement, textile and chemicals. The merger will c;reate a $9.2 billion manufacturing and service business.

"The telecom business (Idea Cellular) was draining funds from Nuvo and the promoters needed to encash their capital. That is why they will put their own capital in the market through the listing," said a consultant, who declined to be named as he was a part of the deal making process.

On Monday, the National Company Law Tribunal's bench at Ahmadabad approved the merger plan. "Having built a broad-based portfolio and a leadership position in the sector, Aditya Birla Financial Services is well placed to grow rapidly, given the under-penetration of financial products and services in India," chairman Birla said in a statement. ABFS is a holding company for all group financial businesses — NBFC, life insurance, asasset management, housing finance, health insurance, broking, insurance advisory, private equity and online money management.