Grasim minority shareholders clear Nuvo merger

Minority shareholders of Grasim Industries approved the merger proposal with Aditya Birla Nuvo in a shareholders’ meeting held on Thursday in Nagda, Madhya Pradesh, shrugging off concerns from advisory firms and large investors that the merger was a bad move.

When the merger was announced, Kumar Mangalam Birla, chairman of the Aditya Birla Group, came under attack from investors who said it was being done to raise the stake of the promoters in the merged “New Grasim” to 60 per cent. 

Grasim’s minority investors, who own a 68.7 per cent stake in the company, were also concerned that the cash-guzzling telecom business would eat away the surplus of the company.

But with 92 per cent of shareholders voting in favour of the special resolution, they clearly sided with Birla.

Birla, along with group Chief Financial Officer Sushil Agarwal and Chief Strategy Officer Saurabh Agarwal stitched a plan to allay investors’ fears. Several meetings were held with bosses of mutual funds, government-owned institutions and foreign investors. 

The entry of Reliance Jio in the Indian telecom industry was a big concern as was how Idea Cellular would take on the competition.

Birla on March 20 unveiled a plan to merge Idea Cellular with Vodafone India to become India’s largest telecom player with a 40 per cent market share. Grasim shareholders were finally placated.

In an interview to this newspaper, Birla said the shareholders of group companies had gained following numerous mergers and acquisitions. “The management has taken hundreds of hours to set these deals and it will take the market some time to grasp them,” he said on March 20.

Idea Cellular also plans to sell its stake in Indus Towers. Idea Cellular owns a 16 per cent stake in Indus Towers, while Vodafone and Bharti Airtel own 42 per cent each.

Since the merger announcement Grasim has managed to beat the Sensex marginally. Grasim shares were up 8.8 per cent since August 10, while the BSE Sensex rose 7 per cent.  

After the merger, the financial services business of Nuvo will be de-merged and listed. Grasim shareholders will receive free shares in Aditya Birla Financial Services.

Proxy advisory firms had said the merger was not in the interests of minority shareholders. InGovern had said the companies were being merged so as to help the promoters to exert more control. IIAS had said Grasim’s diversified business was saddled with complexities.

InGovern said the Birlas must work towards simpler shareholding structures by eliminating cross-holdings and layering. It said the Birla group promoter holding was structured in a way to exercise maximum control with minimum equity.

Shareholders of Aditya Birla Nuvo will meet on April 10 to vote on the merger proposal.

Mega merger

11 August: Grasim, Aditya Birla Nuvo announce merger

12 August:  Minority shareholders voice concern over merger 

20th March:  Group announces Idea Cellular, Vodafone merger

6 April:  Grasim shareholders clear merger with Nuvo