'ABFSL-Grasim deal not in public shareholders' best interests'

The proposed merger of Aditya Birla Nuvo Financial Services Ltd (ABSFL) with Grasim Industries seems to be for retaining "higher control while having low beneficial interest" and would not be in the best interests of public shareholders, says a report.
Proxy advisory firm InGovern today said the partial demerger of ABSFL with Grasim Industries retaining around 57 per cent stake is "not in the best interest of the public shareholders of both Grasim as well as Nuvo".
On August 11, Aditya Birla Group announced plans to merge ABFSL with Grasim Industries to create a nearly Rs 60,000-crore diversified entity.
Under the plan, the financial services business of the merged entity would be hived off and merged with ABFSL, a wholly-owned arm of Aditya Birla Nuvo Ltd (ABNL) and would be listed subsequently.

According to InGovern, partial demerger seems to have been "undertaken to with an intent to retain higher control while having low beneficial interest".
The management contention of Grasim having to support ABFSL does not hold as the company can and should have its own standing.
While unveiling the deal on August 11, Aditya Birla group Chairman Kumar Mangalam Birla had said the proposed restructuring "will create one of India's largest, well- diversified companies with a healthy mix of business with steady cash flows and long term growth opportunities".
He had also said the demerger and listing of financial services business would unlock value for shareholders.