K M Birla to raise stake in Century Textiles

To consolidate grip over grandfather's company with 7% more

The chairman of the $40-billion Aditya Birla Group, Kumar Mangalam Birla, is expected to buy a sizeable stake in Century Textiles and Industries, owned by his grandfather, B K Birla, by subscribing to a preferential allotment of shares worth about Rs 700 crore, cleared by the company's board on Monday.

This will help the Birla scion to consolidate his grip over Century Textiles. With the preferential offer, Birla will own an additional six-seven per cent of the Rs 6,600-crore company. At present, the promoters own close to 40 per cent of the cement-to-real estate company and want to increase their stake to over 51 per cent, insiders say.

The Century Textiles share closed 7.3 per cent up at Rs 381 on Monday on reports that Kumar Mangalam Birla will subscribe to the issue. On Monday, the company reported a net loss of Rs 5 crore for the fourth quarter ended March against a net profit of Rs 18 crore in the year-ago period and total income of Rs 1,857 crore against Rs 1,614 crore. For the year ended March, it posted a net profit of Rs 3 crore against a net loss of Rs 34 crore in the previous year and total income of Rs 6,694 crore against Rs 5,976 crore. The company's board of directors has recommended a dividend of Rs 5.50 on an equity share of Rs 10.

Kumar Mangalam, 46, is on the board of Century Textiles and in the absence of his grandfather is chairing board meetings and annual general meetings. Insiders say he is encouraging B K Birla, 93, to run the company for as long as he can.

Of the promoter's stake in Century Textiles, Pilani Investments, a holding company jointly owned by B K Birla and Kumar Mangalam Birla, owns a 37 per cent stake. Kumar Mangalam Birla and his grandfather bought over Pilani Investments from other Birla family members after a fight broke out over the late M P Birla's  estate in 2004. The Lodha family, which received M P Birla's shares according to his widow Priyamvada's will, own 25 per cent of Pilani Investments. The will is being contested by Birla family members in Kolkata courts.

After the controversial bequest, B K Birla made his own succession plan clear, giving all major companies in his group to Kumar Mangalam. Kesoram Industries, a Rs 5,500-crore company, will be run by Kumar Mangalam as chairman and B K Birla's daughter Manjushree, as vice-chairman. B K Birla's other daughter, Jayshree Mohta, has been given Jayshree Tea & Industries.

With almost 12.8 million tonnes cement manufacturing capacity, Century Textiles is a perfect fit for the Aditya Birla Group, which is among the top 10 cement manufacturers in the world, with a capacity of almost 57 million tonnes. Century Textiles is also redeveloping its mill land in central Mumbai into a commercial complex and a hotel.