Birlas draw up fresh plan for Pilani stake

The Birlas have drawn up a fresh plan for the proposed untangling of the cross-holdings in Pilani Investments & Industries, the family's investment arm that holds shares in all major group companies and about 37 per cent stake in the Rs 2,500-crore (Rs 25 billion) Century Textiles.

In a departure from the earlier plan of Kumar Mangalam Birla buying out the other Birlas in Pilani, the broad contours of the new formula suggest that the deal will be done in two stages: Basant Kumar Birla will acquire the others' stake and later bequeath his holding to Kumar Mangalam, his grandson.

A spokesperson for the Aditya Birla group declined to comment on the development. Sources close to the development said the new plan would ensure that the promoters would not have to make the mandatory 20 per cent open offer to the shareholders of Pilani and Century Textiles.

The money involved for a mandatory offer for Pilani shareholders is not huge but 20 per cent stake of Century Textiles, at today's market rate, are pegged at Rs 314 crore (Rs 3.14 billion).

They added that since Basant Kumar's acquisition of other Birlas' stake would be treated as inter se transfer among promoters, it would not trigger an open offer.

As per the rules, any transfer of shares from a grandfather to a grandson also does not trigger an open offer.

B K Birla holds 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. According to the plan, BK Birla will buy out the GP-CK Birla stake of 25 per cent and SK Birla's 10 per cent and bequeath 65 per cent stake to Kumar Birla.

MP Birla's 25 per cent stake will remain untouched for the time being in view of the court cases.

"Kumar Mangalam's direct acquisition of the other Birlas' stake in Pilani would have been treated as a change in management control. In that case, the acquisition would have triggered the mandatory 20 per cent open offer for the shareholders of Pilani and Century," sources said.

According to them, the valuation of Pilani had emerged as the major stumbling block for the solution of the issue, especially with the spiralling prices of all stocks.

"All the companies in which Pilani has got investments are traded at unprecedented high levels, making the solution a more costly affair," said a source.

A top source in Birla Buildings, headquarters of the Birla groups in Kolkata, admitted that "nothing would happen soon".

When asked for the reason, the source said "perhaps we don't feel the urgency".

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.