Pilani Investments bought 8.1 mn Idea shares before merger talks

Purchased in a dozen tranches ranging from 15,000 shares to 2.95 mn, these cost Rs 58.6 cr

Pilani Investments and Industries Corp, the investment firm of Birlas, has picked a small holding in the group’s telecom venture, Idea Cellular, and is sitting on handsome gains, following the news of merger talks with rival Vodafone. 

Pilani acquired 8.1 million shares of Idea through market purchases between November 18 and December 6. Bought in a dozen tranches ranging from 15,000 shares to 2.95 million, these cost Pilani Rs 58.59 crore, exchange filings by Idea under insider trading regulations showed.

The average cost of acquisition worked out to Rs 71.7 per share. Though the shares were trading in a tight range between Rs 70 and Rs 80 through December and early January, they have taken off after Vodafone confirmed it was in talks with Aditya Birla Group for a possible merger.  

“Vodafone confirms that it is in discussions with the Aditya Birla Group about an all-share merger of Vodafone India (excluding the 42 per cent stake in Indus Towers) and Idea," the British telecom major said in a statement earlier this week. 

From the lows of Rs 67.5 hit on January 18, Idea shares have gained around 62 per cent, closing at Rs 109.8 on Thursday.

At these levels, Pilani’s Idea holding was worth Rs 89.7 crore. That is a mark to market gain of Rs 31.10 crore or 53 per cent. To put this in perspective, Pilani reported a total revenue of Rs 46.6 crore in FY16. 

Pilani’s 0.23 per cent holding in Idea is not among its biggest in Birla-listed firms. In Hindalco, it owned 29 million shares for a 1.4 per cent stake, 22.3 million Grasim shares for a 4.79 per cent stake. It is also the key promoter of BK Birla firms Kesoram Industries and Century Textiles. Though Pilani has valuable investment holdings, its revenue is mainly from dividend and interest from its investments. 

While some analysts said the move could be to shore up holdings ahead of the merger negotiations with Vodafone, others are puzzled by the timing of the move, wondering if this amounts to taking advantage of unpublished information. 

An e-mail sent to Aditya Birla group spokesperson on Tuesday did not elicit any response. A Sebi spokesperson also did not respond to queries. 

Shareholding pattern of Idea showed Pilani did not own any Idea shares as of September 2016. 

Aditya Birla Nuvo is the largest promoter group shareholder of Idea with 837.5 million shares or 23.3 per cent. Other Birla group entities Grasim Industries, Hindalco Industries and Birla TMT holdings own between four and eight per cent shares in Idea, while group chairman Kumar Mangalam Birla owns about 0.23 million shares in his personal capacity. 

Together, these promoter group entities hold 42.5 per cent as of December 2016. 

In August, Nuvo and Grasim announced a restructuring plan, which is under process. Pilani Investment Shares gained 1.67 per cent to close at Rs 1,579 a piece on Thursday.