The Century Textile-UltraTech merger deal is going down to the wire, and Aditya Birla Mutual Fund’s vote on it may turn out to be the clincher.

Proxy firm Institutional Investor Advisory Service (IiAS) has asked the largest non-promoter shareholder and other institutional investors to vote against the deal, citing loss to minority shareholders of Century Textiles.

But legal and corporate governance experts fear that Aditya Birla Mutual Fund, which holds around 4.5 per cent stake in Century Textiles, may be able to swing the deal. The merger needs the support of 50 per cent of Century Textiles’ minority shareholders.

Market analysts reason that the merger is intended to bring all the cement assets of the Birla group under one roof. Once the merger is effected, Century Textiles will have a large real-estate business apart from pulp, paper and textiles. But the market reckons that cement companies are finiding better valuation than real-estate companies. About half of Century’s revenue comes from the cement business as of now, a report from IiAs said.

“The per-tonne valuation of Century’s cement assets is lower than those considered in similar transactions,” IiAS said in its report to shareholders. “While it may be argued that the EV/EBITDA (enterprise value/earnings before interest, tax and debt amortisation) multiple is within the industry range, it is on the lower side. This would not be a concern, were this transaction not between two entities in the ‘same business group.’ After the sale, Century Textiles will be present in rayon, textiles paper and real estate.”

In addition to Aditya Birla Mutual Fund’s 4.5 per cent stake, another 1.6 per cent stake in Century Textiles is held by Birla Corporation. Other large shareholders include LIC, Kotak Mutual Fund and Goldman Sachs. But each of them holds 1-2 per cent. Promoters led by Kumar Manglam Birla hold nearly 70 per cent stake in UltraTech and close to 51 per cent stake in Century.

Both Century Textiles and UltraTech did not reply to email query from BusinessLine on the structure of the deal and concerns.

“We recognise that the increasing competitiveness of the cement industry will require Century Textiles to build size to stay relevant. Therefore, an early exit of the business is a strategic decision – but it need not be a hurried one. For the group, it is far more efficient to house the cement business with UltraTech. However, given the significance of the cement business (it contributes 53 per cent to the company’s revenues and 40 per cent of company’s FY18 profits), and that this is a sale to a related party, the board should have made all the efforts possible to get the best value for its assets, even if it required inviting bids from other suitors,” IiAS report said.

Another proxy advisory firm, Shareholder Empowerment Services, has voted in favour of the deal.

“At current value, the deal appears to favour Century shareholders marginally. But the long term additional volume to UltraTech will give them pricing power. Thus UltraTech will gain substantially,” said JN Gupta, promoter, SES.