Kumar Birla at Pilani helm

Basant Kumar Birla and his grandson Kumar Mangalam Birla on Thursday signed an agreement to buy out the combined 27 per cent stake of Ganga Prasad-Chandra Kant Birla and Sudarshan Kumar Birla in Pilani Investments and Industries for Rs 1,500 crore (Rs 15 billion), thereby putting a valuation of Rs 5,555 crore (Rs 55.55 billion) on the company.

"Today we have signed an agreement to purchase a 7 per cent stake in Pilani Investments from SK Birla and 20 per cent from GP-CK Birla. We took the advice of consultants and ultimately they were interested in selling and we were interested in buying. After a long discussion, we have arrived at this price," BK Birla told Business Standard.

BK Birla wills stake to grandson

With this buyout, the BK Birla group will become the largest shareholder in Pilani investments with a 49 per cent stake. "In addition, I have got the support of my brother Krishna Kumar who holds nearly 7 per cent in the company. If you take into account his holding, our stake will cross 56 per cent," BK Birla added.

In effect, the deal paves the way for the handing over of the control of Pilani Investments to Kumar Mangalam Birla as the heir of the BK Birla empire.

Apart from a 37 per cent stake in 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.

SK Birla, when asked if he was open to selling his 7 per cent stake in Pilani Investments, said these were financial dealings and all options were being kept open.

But there are indications that the MP Birla group, which holds a 25 per cent stake in Pilani Investments and where the ownership of RS Lodha has been challenged by the other Birlas, will react to the development differently.

In fact, sources close to the MP Birla group said the deal would trigger the Takeover Code of the Securities and Exchange Board of India whereby an acquirer had to make an open offer after acquiring 15 per cent shares in a company as the Birlas were different groups.

The sources cited the prospectus of the ongoing HT Media initial public offering and other public documents where the Birla families were described as completely independent entities as far back as 15 years ago.

On his part, BK Birla said he was not sure if the buyout would trigger the 20 per cent mandatory open offer for the shareholders of Century Textiles. He also added that there was no need to buy out MP Birla's 25 per cent stake till the ownership issue over his shareholding was sorted out.

Industry sources said the buyout might not trigger a mandatory open offer, as it did not mean a change in management control in Pilani Investments as well as Century Textiles. "In both the cases, it should be considered as inter-se transfer among promoters," said an insider.

The ownership of Pilani Investments has been a matter of public interest ever since Birla group founder Ghanshyam Das Birla died. His entire business empire, barring Pilani, was divided among family members.