The Aditya Birla Group on Thursday announced a plan to merge Aditya Birla Nuvo Ltd (ABNL) with Grasim Industries to create an entity with combined revenue of ₹60,000 crore.

Under this plan, the financial services business will be demerged into a newly formed company — Aditya Birla Financial Services Ltd (ABFSL), which will be listed separately.

The transaction will be completed by the end of the current fiscal; the financial services arm will be listed next year.

The deal will be done in two steps. First, ABNL will be merged into Grasim; that will be followed by the demerger of the financial services business.

For the merger of ABNL with Grasim, shareholders of ABNL will get three new Grasim equity shares for every 10 ABNL shares held.

For the demerger of the financial services business into ABFSL, shareholders of Grasim (post-merger) will receive seven ABFSL equity shares for every Grasim equity share held. In other words, a shareholder having 100 Grasim shares will receive 700 ABFSL shares

In aggregate, anyone holding 100 ABNL shares will receive 30 shares in Grasim and 210 shares in ABFSL.

The board of Grasim has also recommended sub-division of its equity shares of ₹10 each into five equity shares of ₹2 each.

Healthy mix of businesses Kumar Mangalam Birla, Chairman, Aditya Birla Group, said the transaction was aimed at finding synergies between the various companies in the group and at unlocking value.

“The proposed restructuring will create one of India’s largest, well-diversified companies with a healthy mix of businesses with steady cash flows and long-term growth opportunities.

“With diverse businesses spanning manufacturing and services, the combined company provides a play on India’s growth story. The demerger and listing of the financial services business will unlock value for shareholders,” Birla said.

Dilip Gaur, Managing Director of Grasim, said the merger provides Grasim shareholders with exposure to fast-growing sectors, including telecom and financial services.

Dispelling investors’ concern about Idea Cellular using Grasim Industries’ reserves to take on growing competition from soon-to-be-launched RJio, Birla said Idea is a separate listed entity and is capable of raising funds on its own.

The current restructuring of group holdings has nothing to do with Idea whatsoever, he said.

The merger is basically to unlock value for investors as the financial services business, which was nurtured by Aditya Birla Nuvo, has grown substantially over time, said Birla.

In addition, he said, Grasim investors would get exposure to a pure-play financial services business that has huge growth potential as the economy grows.

The merger will also consolidate the cross-holding within the group as both companies own stakes in Idea Cellular, Aditya Birla Fashion and Retail and Hindalco Industries.

Grasim has a cash surplus of ₹500 crore, while Aditya Birla Nuvo has net debt of ₹2,500 crore. So, the restructured Grasim will have net debt of ₹2,000 crore after the merger.

Sectoral contribution Post-merger, the cement business will contribute 42 per cent followed by textile (17 per cent) and telecom (16 per cent). The financial services and chemicals businesses will contribute 15 and 9 per cent, respectively. The balance 1 per cent will come from solar and insulator businesses.

Promoter holding The promoter group will hold 39 per cent in the merged entity and the balance will be with the public.

Under the existing structure, the promoter holds 31.3 per cent in Grasim and 58.4 per cent in Aditya Birla Nuvo.

Post-restructuring, promoters will own 17 per cent in the financial services business; Grasim will own 57 per cent.

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