The B K Birla group's plan to clear off cross-holding between two main money spinners - Kesoram Industries and Jay Shree Tea & Industries - has gone awry following the purchase of shares by the group to ward off the Dubai-based non-resident Indian who built up substantial holdings in Kesoram.
Group patriarch B K Birla had announced at an annual general meeting of Kesoram nearly two years ago that Kesoram had sold out its long-term investments in Jay Shree and Padmavati Investments (formerly Padmavati Raje Cotton Mills) to other group outfits in the financial year ended March 30, 2000.
Jay Shree too sold nearly three lakh shares of Kesoram. Padmavati also scaled down its holdings in Kesoram.
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This trend has been reversed. The annual report of Jay Shree for 2000-01 showed that the company again scaled up its holding in Kesoram in the last financial year. In 2000-01, Jay Shree bought 6,18,178 shares of Kesoram for Rs 4.19 crore. In other words, Jay Shree purchased shares of Kesoram for an average cost of Rs 67.90 each.
A top official of Jay Shree said: "The company pumped in the money in Kesoram as long term investment to scale up the group's holding after the reported acquisition of Kesoram shares came to light. "
In addition, some companies, including Padmavati Investments, and "friends and supporters" picked up shares to put the group's stake in the Rs 1345-crore Kesoram at a comfortable 38 per cent against the previous year's 25 per cent. The financial institutions now hold 17 per cent in Kesoram against 24 per cent in 1999-2000.
The group might renew the process of clearing off cross holding between Kesoram and Jay Shree in the coming years. "Since cross-investments in group companies, a necessity during the license-raj, has lost its relevance in the open market economy where a group can enter into a business it wants to, we may come out of it," sources added.
Apart from Kesoram, Jay Shree has long term investments in group companies such as ECE Industries, Manjushree Plantations, Mangalam Timber, Mangalam Cement, Century Enka, Birla Century Finance and Pilani Investment.
Kesoram has investments in group companies namely Century Textiles, Express Dairy, HGI Industries (formerly Hindusthan Gas & Industries), Indian Rayon, Bharat Commerce, Birla Century Finance, Birla Buildings, ECE Industries, Hindusthan Heavy Chemicals, Mangalam Cement, Mangalam Timber Products and Universal Tyres.