The Birlas are believed to be in the process of untangling the cross-holdings in Pilani Investments & Industries, the Birla family's investment arm that holds shares in all major Birla companies and close to a 37 per cent stake in the Rs 2,540 crore (Rs 25.4 billion) Century Textiles.
The untangling of cross-holdings is expected to be announced by the end of June.
Two Birla family sources in Kolkata told Business Standard that the broad contours of the settlement suggested that Aditya Birla Group chairman Kumar Mangalam Birla would buy out the equity of others in Pilani Investments. As a result, Century Textiles will come into his fold.
He will transfer Pilani Investments' holdings in other Birla companies to the groups that control these companies. A spokesperson for Kumar Mangalam Birla, however, said, "All this is not true."
B K Birla holds a 30 per cent stake in Pilani Investments. The Ganga Prasad-Chandra Kant and the Madhav Prasad Birla groups hold 25 per cent each. Sudarshan Kumar Birla holds nearly 10 per cent. The remaining 10 per cent is widely held.
In addition to Century Textiles, Pilani Investments holds shares in Indian Rayon, Hindalco, Grasim, Bihar Caustic, Birla VXL, Cimmco Birla, Jayshree Tea, Kesoram Industries, Mysore Cements, Mangalam Cement, Sutlej Industries, Zuari Industries and Tanfac.
A Birla family member told Business Standard some time ago that the valuation of Pilani Investments could be in the region of Rs 2,000 crore (Rs 20 billion).
In addition, Kumar Mangalam Birla might have to fork out a premium for majority control in Century, he said. Going by the market valuation of Pilani Investments alone, Kumar Mangalam Birla will have to fork out at least Rs 700 crore (Rs 70 billion) to buy the shareholding of G P Birla, C K Birla and S K Birla.
He said S K Birla and C K Birla would be net recipients of cash after adjusting for the cross-holdings in Pilani Investments. M P Birla's 25 per cent stake in Pilani Investments will not be bought till the ownership of this shareholding is resolved.
B K Birla had indicated earlier that he would bequeath his 30 per cent stake in Pilani Investments to his grandson, Kumar Mangalam Birla.
But a thorny matter has to be resolved before any settlement is arrived at. Birla family sources said family members had consulted lawyers to find out whether the proposed untangling of cross-holdings would trigger the mandatory 20 per cent open offer for Century Textiles.
"The transfer of shares from Pilani Investments to Kumar Mangalam Birla should be treated as an inter se transfer, if the entire Birla family is considered one entity. However, since the Birlas have run separate business empires for years, they may be treated as different corporate groups. In that case, a mandatory 20 per cent open offer is required," said a legal practitioner.
The plan
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Kumar Mangalam Birla buys GP Birla, CK Birla and SK Birla out of Pilani Investments. BK Birla to bequeath his stake. MP Birla's stake not to be bought till ownership issues are resolved.
- Kumar Mangalam Birla will transfer Pilani Investments' holdings in other Birla companies to the groups that control these companies.
- Century Textiles comes into Kumar Mangalam Birla's fold. May have to fork out a premium for majority control. May also trigger open offer.
