The Aditya Birla Group plans to meet large institutional investors over the week to explain the strategy and benefits behind its recent restructuring process.

Saurabh Agarwal, Chief Strategy Officer, Aditya Birla Group, told BusinessLine that the entire plan was not properly understood by investors due to rumours before the deal was announced.

On Friday, shares of Aditya Birla Nuvo (ABNL) lost almost a fifth of their value to close at ₹1,290 per unit as investors gave a thumbs-down to its merger with Grasim.

One concern was that ABNL and Grasim Industries were being merged to increase the promoters’ holding. Agarwal said the promoters, in fact, have cancelled a 2.6-per cent holding in ABNL, worth ₹500 crore, in the entire restructuring which started sometime in June. The other main concern is that Grasim will now have various businesses under it, including debt-laden Idea Cellular and other slow-growing divisions. However, the company said the merger was being done to fuel its financial services business and not to fund the telecom unit.

“The growth of Grasim over the past few years has tapered while the financial services business has grown and it needs huge funding to take it to the next level,” Agarwal said.

With the way financial services business is growing, ABNL would require investment of ₹1,000 crore per annum, Agarwal said. In the last 10 years, promoters have invested ₹5,000-6,000 crore in ABNL to nurture it. The new business verticals like payments bank, insurance, NBFCs and housing finance need ₹6,000 crore over 6-7 years, he said.

ABNL, which does not generate much cash to fund growth, has raised ₹3,000-3,500 crore in the last four-five years. “The promoters have invested ₹2,500 crore through preferential allotment and this year they will invest ₹750-800 crore in ABNL,” said Agarwal.

Under the new merger scheme, the financial services business can get a better rating and raise money at lower rates.

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