The Telegraph
Since 1st March, 1999
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AV Birla trio in recast mode

Mumbai, Sept. 9: Three companies belonging to the Aditya Birla group ' Indian Rayon, Indo-Gulf Fertilisers and Birla Global Finance ' are planning a major internal restructuring exercise that may involve spinning off certain businesses through a process of de-merger.

The three Aditya Birla group companies have convened meetings of their respective boards on Sunday to decide on the “restructuring proposal”. Kumar Mangalam Birla chairs all the three boards.

As part of the restructuring plan, the insurance business will be hived off to Birla Global Finance, creating a financial powerhouse for the group that will have interests in asset management and insurance.

At present, the AV Birla group’s investment in the insurance venture is routed through Indian Rayon, which has a 74 per cent stake.

In identical notices sent to stock exchanges, the three companies said their boards would meet on September 11 to consider a major restructuring proposal under Sections 391 t0 394 of the Companies Act, 1956.

Sections 391 to 394 are laws that have a wide ambit and companies use it mainly to restructure equity capital or debt or even dramatically alter the fabric of the company through a de-merger or merger.

“These sections have a fairly wide ambit,” say legal sources. It is widely used to prune capital and allows a company to approach a high court to seek permission to undertake a drastic corporate restructuring exercise.

Indo-Gulf primarily makes fertilisers, while Indian Rayon has interests in a myriad sectors. It includes insulators, rayon, insurance, software, BPO operations and textiles. It ownsing several big garment brands and is supposedly the biggest player in the country.

Birla Global Finance has just completed a restructuring exercise and it probably will again be used as a vehicle for another round of revamp.

Indian Rayon, over the years has been used by the Aditya Birla group as an investment vehicle to acquire new businesses.

Indian Rayon was used to acquire Madura Garments. Later, it was used to buy software maker PSI Data and BPO company Transworks.

Indian Rayon acquired these new businesses after it sold its cement plants to Grasim Ltd. It has cash-generating businesses in segments like insulators and carbon black that allow it to foray into new sectors.

The stock markets appear to have got wind of the restructuring plan.

The prices of Birla Global and Indian Rayon stocks rose sharply. However, marketmen argue that in the bull market, many shares have gained value.

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