Valuation blocks solution to Pilani crossholdings

The huge valuation of Pilani Investments & Industries, the investment arm of the Birla groups that holds shares in almost all major Birla companies, is emerging as a stumbling block in the way of untangling the crossholding in the company. As on February 15, Pilani's investments stood at Rs 1,834.67 crore.

Sources in the Birla Building, the Kolkata-based headquarters of Birla companies, said family members, especially seniors, wanted to resolve the ownership issue of Pilani Investments, which has been pending ever since the demise of legendary Ghanshyam Das Birla.

"Their eagerness intensified after the controversy over the ownership of the M P Birla group emerged. They wanted to resolve it at the earliest. But given the huge valuation of Pilani Investments, the efforts may not succeed this time also," sources added. The move failed several times in the last 15 years.

Sources close to the development said although no formal valuation of Pilani Investments has been done, the Birla family members, who want to sell off their stakes. expect a premium over the market price of their holdings.

A member of a Birla family said Kumar Mangalam can afford to cough up more money than any other members of the family. Taking only the market valuation of Pilani's Investments into account, Kumar Mangalam Birla will have to shell out at least Rs 800 crore to buy out the shareholding of G P-CK and S K Birla.

The B K Birla group patriarch Basant Kumar Birla has indicated that he will bequeath his 30 per cent stake in Pilani Investment to his grandson Kumar Mangalam. There is no need to buy out M P Birla's 25 per cent stake till the ownership issue over this shareholding is sorted out.

B K Birla had recently announced that either Kumar Mangalam Birla or Chandra Kant Birla would buy out the other's holding in Pilani. B K Birla holds a 30 per cent stake in the company, while Ganga Prasad-Chandra Kant and the Madhav Prasad Birla group holds 25 per cent each.

Sudarshan Kumar Birla holds nearly 10 per cent. The balance 10 per cent is widely held.

A member of a Birla family told Business Standard that asking for a premium is "natural" since acquisition of Pilani would give the acquirer a substantial control of some major companies, including Century Textiles, Indian Rayon and Hindalco and Grasim.

In addition, Pilani Investments has shares in Bihar Caustic, Birla VXL, Cimmco Birla, Jayshree Tea, Kesoram Industries, Mysore Cements, Mangalam Cement, Sutlez Industries, Zuari and Tanfac.

Sources close to the B K Birla family admitted that it would take at least four-five months for the proposed untangling of Pilani Investments' shareholding.

They, however, denied that the issue of valuation is leading to the delay. "Kumar Mangalam and Chandra Kant are too busy to meet frequently to resolve the issue. They can't meet more than once a month," they said.