Individual Assignment

Merger of Birla Aditya Birla Nuvo Ltd. and

Grasim Industries Ltd.

Submitted by: -

Name: Mokshita Vajawat

Roll No. 201223

Batch: MBA – FT (2020-2022)

Submitted to: Prof. Rajesh Kumar Jain

Institute of Management, Nirma University

ADITYA BIRLA NUVO LTD.

Aditya Birla Nuvo, the AV Birla Group, traces its origins to a small beginning with the acquisition of
Indian Rayon Corporation Limited, a viscose fiber manufacturing unit, in 1963.

Aditya Birla Nuvo is now a diverse organization and platform that has introduced many new businesses
in India’s premier of the real estate business, Aditya Birla Group. Aditya Birla Nuvo has a balanced
portfolio of traditional and youth businesses under it, from textiles to health insurance.

The Aditya Birla team is in the Fortune 500 league. It is supported by an extraordinary force of 130,000
employees, from 25 different nationalities. In India, The Group has been awarded 'India's Best Employer
and Among the Top 20 in Asia' by Hewitt – Economic Times and the Wall Street Journal Study 2007.

More than 50 percent of the Group's revenue comes from its overseas operations. The team operates in
25 countries: India, UK, Germany, Hungary, Brazil, Italy, France, Luxembourg, Switzerland, Australia,
USA, Canada, Egypt, China, Thailand, Laos, Indonesia, Philippines, Dubai, Singapore, Myanmar,
Bangladesh, Vietnam, Malaysia and Korea.

The sharp focus of the razor on each business has made it a leading player in many areas, including
viscose filament, carbon black, branded clothing, agribusiness, textiles and metals. Over the past few
years, Aditya Birla Nuvo, through her subordinate companies and affiliates, has successfully benefited
from life insurance, telecom, business process outsourcing (BPO), IT services, asset management and
financial services.

Empowered by the highly intelligent staff of more than 37,000 employees and the full combination of
revenue and profit distribution, the company is in a strong position to invest in growing businesses to
maximize long-term profits for shareholders.

The company's business location includes:

Viscose Filament Yarn - Indian Rayon - Indian Rayon, a major player in the Indian viscose filament thread
business, is the second largest producer of viscose filament yarn (VFY) in India with a 30 percent
domestic market share.

Clothing - Madura Clothing - Indian Rayon, a major player in the Indian viscose filament thread business,
is the second largest manufacturer of viscose filament yarn (VFY) in India with a 30 percent domestic
market share.
Carbon Black - Hi-Tech Carbon - –Tech Carbon, Aditya Birla Nuvo's black carbon business, is the second
largest producer of Carbon Black in India, accounting for 33 percent of the domestic market share.

Agri solutions - Indo Gulf Fertilizers - The first company to introduce Six Sigma principles in the
agricultural sector, Indo Gulf aims to provide comprehensive agricultural solutions to farmers with
additional value-added products and services.

Fabrics - Jaya Shree Textiles - A leading player in the domestic linen sector and part of the worst, Jaya
Shree Textiles has transformed the Indian textile market by promoting linen in a wide customer base
through the brand Linen Club.

Insulators - Aditya Birla Insulators - Aditya Birla Insulators, India's largest producer of highly effective
shields, has used reliable power, to provide world-class solutions in the electricity industry.

Joint ventures and subsidiaries:

 Idea Cellular Limited, the fifth largest mobile telephony service provider in India

 Birla Sun Life Insurance, one of the leading life insurance companies in India 

 Birla Sun Life Asset Management, one of the leading asset management companies in India

 Aditya Birla Minacs Worldwide Limited, among the top five BPO players in the country by
revenue size.
Grasim Industries

Grasim Industries Limited is an Indian production company based in Mumbai. It was started in 1947 as a
textile manufacturer. Since then Grasim has transformed it into viscose staple fiber (VSF), cement,
sponge iron, chemicals and financial services including asset management and health insurance.

Grasim is the world's largest producer of viscose rayon fiber with a market share of about 24%. Fabrics
and products related to impact 15% of group profit.

Grasim Industries Limited was established in 1947; Grasim is the largest Viscose Rayon Fiber supplier in
the country, exported to more than 50 countries. Grasim is headquartered in Nagda, Madhya Pradesh
and has plants in Kharach (Kosamba, Gujarat), Bharuch (Vilayat GIDC, Gujarat) and Harihar, Davangere in
Karnataka province.

In the late 1990s and later, there was a strong focus on the textile industry following the end of the
Multi-Fiber Arrangement (MFA).

AV Cell Inc., a joint venture between Aditya Birla Group and Tembec, Canada, began operating in 1998
to produce soft wood and solid wood for internal use between different units of the Group.

Collectively, Grasim Industries Ltd. and Tembec, Canada, acquired AV Nackawic Inc., which produces
soluble pulp. Grasim Industries Ltd. provides Viscose Staple Fiber (VSP). Aditya Birla Group's VSF
production plants are located in Thailand, Indonesia, India and China.

The Group's VSF business operates through its three subsidiaries - Grasim Industries of India, Thai Rayon
Corporation in Thailand and Indo Bharat Rayon of Indonesia, which also oversees its Chinese operations
at Birla Jingwei Fibres, China.

The company's business location includes:

Viscose staple fiber - Grasim is India's pioneer in viscose staple fiber (VSF), a man-made fiber, which
decomposes with cotton-like properties. Multi-functional and easy-to-mix fiber, VSF is widely used in
clothing, household textiles, clothing, textiles and non-woven materials.
Grasim VSF plants are found in Nagda in Madhya Pradesh, Kharach in Gujarat and Harihar in Karnataka,
with a total capacity of 333,975 tpa.

Cement Grasim entered cement production in the mid-1980s, established its first cement plant in Jawad
in Madhya Pradesh and has since grown to become the leading cement player in India.

Grasim’s cement works today cover the length and breadth of India, with 11 composite plants, eight
dividing parts, four mass terminals and 53 ready-mixed concrete plants. All plants are found near large
limestone mines and are fully automatic to ensure consistent quality. All units use state-of-the-art
equipment and technology and are certified by ISO 9001 quality systems and ISO 14001 environmental
management systems.

Chemicals - Rayon grade caustic soda is an important asset in the production of VSF. To achieve a
reliable and economical supply of this chemical, Grasim established a rayon grade caustic soda unit in
Nagda in 1972 with an initial capacity of 33,000 tpa. This has grown to 258,000 tpa, making it the world's
second largest unit of caustic soda.

Fabrics - Grasim has a strong presence in textiles and synthetic fibers, through its subsidiary, Grasim
Bhiwani Textiles Limited, and is best known for its branded suits, Grasim and Graviera, especially
polyester - men's clothing with cellulosic markings. Its textile plants are found in Bhiwani (Haryana) and
Malanpur (Madhya Pradesh).

Accolades:

 Grasim Industries is ranked 154th in the Forbes rankings.

 In 2003, its Chemical Division was awarded the Rajiv Gandhi National Quality Award.

 Grasim sponsors the Grasim event Mr. India from 1994 to 2012 which sent the winner to
compete in international events such as Mister International and Mister World.

 It is ranked 24th on the Fortune India 500 list by 2020.

Type of Merger

The two companies, Grasim and Aditya Birla Nuvo (AB Nuvo), have entered into a two-way merger. The
first step involves merging the two companies and the second would be a spin-off of the financial
division.
For every 10 shares held, the shareholders of AB Nuvo will receive 3 shares of Grasim. Post-merger
when the financial services business is spun off, the shareholders of the merged Grasim will receive
seven shares of Aditya Birla Financial Services – the arm which holds the insurance and asset
management companies.

From a Grasim’s shareholders point of view, he would continue to hold the same number of shares of
the company and will also receive seven shares of Aditya Birla Financial Services. Thus a Grasim
shareholder has nothing to lose.

Merger Motives

The Birla group management has said the transaction would result in consolidation of a fast growing
businesses with a strong, stable cash-flow portfolio. It will also unlock value for the shareholders via the
listing of its financial arm and simplify the group structure.

Elaborating on the reason behind merger, the company said: "The proposed merger will consolidate
Aditya Birla Group's Chlor Alkali business into Grasim and strengthen its existing portfolio of viscose
staple fibre, caustic soda and allied chemicals in standalone company."

It further said: "The merger will enable the geographical diversification for Grasim through the addition
of ABCIL's manufacturing facilities spread across the country. It also enables the business to capitalise
growth opportunities by bringing in operational and financial synergies, backed by Grasim's strength."

Grasim said the consolidation is in line with Aditya Birla Group's philosophy to unify similar business in
one company.

But Many of the Share holders were not satisfied with these reasons and they believed the merger
would give Idea Cellular access to strong cashflows before the spectrum bidding process but Mr Kumar
Manglam Birla denied them.

Analysis of benefits of this Merger to the Shareholders of both the companies

What the merger means for shareholders

1. Once the merger is implemented, it will result in a financial services company with 57 per cent owned
by post-merger Grasim and the balance being held by post-merger Grasim shareholders on a
proportionate basis.

2. Each AB Nuvo shareholder will get 3 new shares of Grasim for every 10 shares held in AB Nuvo.

3. For demerger of Financial Services business into ABFSL, each shareholder of Grasim (post-merger) will
receive 7 equity shares in ABFSL for every 1 equity share held in Grasim

Brokerages have mixed views about the restructuring news. Terming the merger as a dampener,
Religare Capital Markets said, “Prima facie the deal value looks fair based on current market price,
however Grasim now becomes a holding company with various business under its roof including
telecom.”