Aditya Birla Nuvo and Grasim Industries Merger : Will Investors Cheer or Protest


On Thursday, 11th August 2016 the Aditya Birla Group has merged its two main companies, Aditya Birla Nuvo Limited and Grasim Industries Limited. Both Aditya Birla Nuvo and Grasim Industries Limited serve as holding companies to create a stronger entity and also unlock shareholders value in market.

Merging of this two companies will create an entity with yearly profit of Rs. 59,766 and net profit of Rs. 4,245. Grasim Industries Limited becomes a large holding company of the group. Therefore investors will give it a holding company discount and there will price to earning de-rating for stock.

According to the report, during the last two trading sessions, Grasim Industries shares are 12% down.

A fund manager said, “With HDFC Life Insurance reverse merging with Max, ICICI Life Insurance filing for an IPO, it is natural for the AV Birla Group to monetise their financial services.”

Aditya Birla Nuvo and Grasim Industries Merging
Aditya Birla Nuvo and Grasim Industries Merging

Approx. 80% profit of Aditya Nuvo comes from three business.

Financial Services


Fashion and Apparel

Aditya Birla Nuvo Limited always seen as a vehicle for the larger group’s new businesses. Kumar Mangalam Birla said that, the merger will make Grasim Industries Limited one of India’s largest, well-diversified companies with a healthy mix of businesses with a steady cash flow and long-term growth opportunities.”

Thursday, Grasim’s shares took a beating and they ended at Rs. 4,538.95on the BSE, down 6.44% and on a day the benchmark Sensex rose 0.31%.

Analysts said that the merging of this two companies would result in Grasim’s debt level shooting up and also promoters holding in the company increasing from 31% to 39%.

SP Tulsian also said that, this merger is big loss for Grasim Industries as it will be saddled with Rs 35,000 crore additional debt.

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