The Telegraph
Since 1st March, 1999
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Birlas cringe at the Pilani pill Lodha’s berth claim fears stalk insiders

Mumbai, July 13: After the shock comes the fear.

The Birla patriarchs have been thrown into turmoil over Priyamvada Birla’s will because it gives Rajendra S. Lodha, a chartered accountant and former Ficci president, a major stake in Pilani Investments & Industries Corporation.

Pilani Investments — in which the MP Birla group has roughly 25 per cent — has a strategic holding in several Birla group flagship companies, including Century Textiles and Industries.

The BK Birla group has a 30 per cent stake in Pilani Investments while the CK Birla group has a 25 per cent stake. The KK Birla faction also holds a substantial stake in the investment company.

Pilani is a closely-held company with the Birla family owning most of the shares. At one point of time, when G. D. Birla was actively building the Birla empire, Pilani used to be traded heavily on the bourses. Pilani owns three crore shares in Century Textiles alone.

Pilani was the favourite vehicle for the Birla founder, who was known to have a penchant for speculative deals, be it jute and cotton futures or in the share market.

At one point of time, Pilani held more shares in Tata Steel than the Tatas themselves. Tata Steel at that point of time was the flagship company of the Tatas.

By virtue of the 25 per cent holding in Pilani, the inheritors of M. P. Birla’s stake could at best ask for a seat on the board of many Birla-run companies, including Century Textiles where it has a significant stake. The Birlas are most rattled by the prospect that a rank outsider could now demand a seat on the company’s board of directors.

The Birla family has held family conclaves at several times in the past to disentangle the cross-holdings through Pilani Investments in several Birla companies. It also tried to buy out the small shareholders in Pilani Investments.

A shareholder once told this correspondent that the Birla family members had sounded him on many occasions seeking to buy out his stake. They told him that if ever he wanted to sell shares in the holding company, they should be given the first opportunity to buy the shares.

The Birlas never missed an opportunity to mop up shares in Pilani. So much so that the shares are no longer traded on the bourses as the liquidity has been sucked out of the counter. People who are steadfast shareholders owning small quantities of Pilani shares have not received their annual report for many years now.

The MP Birla group firms include Birla Corporation, Universal Cables, Vindhya Telelinks, Birla Ericsson Optical, Optic Fibre Goa, Hindustan Gum and Chemicals, Birla DLW, Birla Financial Corporation and the Indian Smelting & Refining Company.

It also has several trusts for educational institutes and hospitals. Some of the prominent ones are Belle Vue Clinic, MP Birla Eye Foundation and South Point School.

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