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MAJOR CONSOLIDATION: Mr Kumar Mangalam Birla, Chairman, Aditya Birla Group, and Mr Sanjeev Aga, Managing Director, Indian Rayon, at a press conference in Mumbai on Sunday. -- Picture by Shashi Ashiwal

Mumbai , Sept. 11

THE Aditya Birla Group, in a major consolidation exercise, has decided to merge Indo Gulf Fertilisers Ltd and Birla Global Finance Ltd into Indian Rayon Industries Ltd.

The boards of all three companies that met on Sunday approved the proposal for the merger.

After the merger, Indian Rayon will be renamed Aditya Birla Nuvo, subject to approval by shareholders. The entire restructuring is valued at over Rs 5,000 crore and will be one of the major consolidations of its kind in the country, the group said.

The merger will be effective from September 1, 2005.

Justifying the merger, Mr Kumar Mangalam Birla, Chairman, Aditya Birla Group, said there was a pool of unused cash with Indo Gulf that needed to be better deployed. And from the Birla Global perspective, it made better sense to create an integrated financial sector entity, he said.

Speaking to the media here after the board meetings, Mr Birla said, "As Indian Rayon held 74 per cent stake in Birla Sun Life, there seemed to be a complementary fit in the merger. In the case of Indo Gulf, in 2003, the idea was to make it a fertiliser major. But the regulatory nature of the industry has led to the company getting strapped for growth. We have waited long enough for deregulation of the fertiliser sector."

As per the valuation that was approved by the boards today, the share swap ratio will result in Indo Gulf shareholders getting one share of Indian Rayon for every three shares held. Similarly Birla Global shareholders will get one Indian Rayon share against three Birla Global shares. The share swap ratios were based on the valuations done by Bansi S Mehta and Co and Deloitte, Haskins and Sells.

"Post merger, there will be two sets of businesses — the brick and mortar businesses of fertilisers, carbon black, viscose filament yarn and textiles that will be the focused value segment and the high growth segment comprising garments, financial services, IT and IT-enabled services and telecom. We believe that our future growth engine will be the high growth segment. The value businesses will throw up the cash to make this happen".

The pool of unused cash waiting to be tapped as of now is to the tune of Rs 764 crore, he said.

On benefits to the shareholders, Mr Birla said Indo Gulf shareholders would get better value for investment in Indian Rayon. Similarly Birla Global shareholders would get to move beyond mutual funds, into life insurance. The company would also look at pension funds and banking as when the regulatory framework allows it, he said.

Mr Sanjeev Aga, Managing Director of Indian Rayon, will continue to be Managing Director of Aditya Birla Nuvo. The Board of Directors of the new company will include Mr S.K. Mitra, the Managing Director of Birla Global and Dr Rakesh Jain, Managing Director, Indo Gulf.

Post-merger, the new company's consolidated accounts as of March 31, 2005 show sales in excess of Rs 3,980 crore, reflecting a 25 per cent rise; net profit of more than Rs 150 crore, up 150 per cent and net worth of over Rs 1,825 crore, an increase of 60 per cent.

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