Birlas to increase stakes in Group Companies to 30%

Subhadip Sircar and Prasanna Upadhay

After a decade-long business consolidation, the Rs 26,000 crore AV Birla Group is now in a control consolidation mode. It plans to increase its stake across all group companies to around 30 per cent. The group will opt for the creeping acquisition route and will not resort to the buyback mode.

In an exclusive interview with FE, AV Birla Group chairman Kumar Mangalam Birla said: “I think we are clearly looking at increasing our holding across group companies by the normal creeping acquisition route that we are allowed to do by the Securities and Exchange Board of India (Sebi). That is something we are looking to do on a constant basis.”

While Mr Birla said that it was difficult to give a promoter shareholding which the group would be comfortable with, he added that 30 per cent would be a “ballpark” figure.

According to Sebi provisions, the promoter group can increase its stake by 5 per cent every financial year through the creeping acquisition route.

While the promoter holding in Grasim stands at 21.94 per cent, Hindalco has a group holding which stands at 24.37 per cent. The promoter shareholding in Indian Rayon and Indo Gulf stands relatively higher at 28.57 per cent and 37.77 per cent, respectively.

The Birlas are also clear that cross-holding across the group companies would not be increased any further. “We are very clear on cross-holding. About nine years ago, we said that we will reduce our cross-holding and stuck to that commitment,” according to Mr Birla.

He admitted that the group had not been able to untangle all cross-holdings as it had been c;reated over a long period of time. Some amount of untangling has been done in the case of IndoGulf and BGFL.

Hindalco has 2.51 per cent stake in Grasim, while Grasim and Indian Rayon in turn hold stakes in Hindalco. Grasim has a 12.27 per cent stake in Indo Gulf while Indian Rayon and Hindalco have substantial holdings over 8 per cent in the company.