Birla Corp shareholders raise concerns over Reliance Cement takeover

Chairman Harsh Lodha justified the takeover as a "long-term bargain" that would help Birla Corp emerge as a strong national player

Scepticism over the Rs 4,800-crore acquisition of Reliance Cement shrouded Birla Corporation’s annual general meeting as shareholders raised questions about the feasibility of the deal as well as its financing.

For over an hour, Harsh Lodha, chairman of Birla Corporation, had to listen to shareholders as they came on stage to express their concerns after which he justified the move.

“The deal has been struck at a time when the cement industry is not growing,” a shareholder commented, asking the company’s chairman for a road map on how the deal would be financed.

Another shareholder referred to the company’s financials, which reflected a fall in the consolidated net profit by 10 per cent for the year ended March 31, and asked about the feasibility of the takeover.

Also Read: Birla Corporation To Focus On Brand Building Post Reliance Cement Takeover

Despite Lodha asking shareholders to refrain from repeating the same questions, a third shareholder took a chance to call for a review of the deal.

After the series of repeated questions ended, Lodha justified the takeover as a “long-term bargain” that would help Birla Corporation emerge as a strong national player.

“We need to increase our presence — not just organically, but inorganically as well. The current assets are old and there are legacy issues. The Reliance deal will help,” Lodha told shareholders.

The chairman of the MP Birla group’s flagship company further said such acquisitions were not based on short-term plans of the company but would help it in the long run.

In its annual report distributed to shareholders, Birla Corporation highlighted that the deal not only brought “high quality assets” of Reliance Cement but also gave it access to mineral concessions in Madhya Pradesh, Maharashtra, Rajasthan, Karnataka, Andhra Pradesh, and Himachal Pradesh.

Lodha also said the company was “financially strong enough to undertake the transaction”.

Talking to mediapersons after the conclusion of the meeting, he said around Rs 1,000 crore would be raised as debt to fund the acquisition.

Public shareholders have a 6.02 per cent stake in Birla Corporation while the promoter group holds 62.90 per cent. The rest is held by insurance companies, mutual funds, corporate bodies, and others.