Aditya Birla Money announced a proposed block deal, in which its parent company Aditya Birla Nuvo is selling a 75% stake to Aditya Birla Financial Services Pvt Ltd. The deal will be done on February 20 through a block deal on the stock exchanges, which will be done at around the market price on that day. It will sell 4.16 crore shares that are valued at Rs 220 based on today’s price which is locked up 5% at about Rs 52.
No further details have been given on the transaction. The block deal structure makes the deal price dependent on the market but also allows the seller to claim tax benefits allowed to investors who sell through a recognised stock exchange. The levying of securities transaction tax on these transactions makes them eligible for zero tax on long term capital gains and 15% on short term capital gains.
While the transaction is among group companies, Aditya Birla Financial Services is likely to be a subsidiary of AB Nuvo. It had recently announced a tie-up with South Korea’s Woori Investment & Securities, primarily to raise overseas funds for investment in India through AB Nuvo’s Financial Services Group. This agreement was to be entered through Aditya Birla Financial Services Pvt Ltd. This is the same company that is acquiring the AB Money stake. The transaction with Woori was to, among other things, result in growing AB Money’s broking presence, by introducing an overseas broking platform for institutional investors and technological and process collaboration. The stake sale appears to facilitate this element of the transaction with Woori.
This may thus be an isolated transaction. Or, it may also be part of a move to combine the various financial services business of AB Nuvo –referred to as Aditya Birla Financial Services Group—under a single corporate entity. Apart from operational benefits like better focus on the business, a separate profit & loss account and balance-sheet will give the financial services business the ability to raise funds on its own. ABFSL may well be the holding company for the financial services business and may exist as a subsidiary under AB Nuvo.
The financial services business is a fairly large one, with assets under management of $18bn spread across various sectors like mutual funds, insurance, lending, private equity, broking and distribution. In the nine months ended December 2009, of AB Nuvo’s total revenues of Rs 14,848 crore, the life insurance business contributed about half (premium income and profit on its investment portfolio) and other financial services contributed about 2%. Their respective contribution to segment profits was a loss of Rs 373 crore (down from Rs 500 crore in the corresponding previous period) and a profit of Rs 56 crore (up from Rs 46 crore).
Aditya Birla Money was earlier known as Apollo Sindhoori Capital Investments, belonging to the Apollo Hospitals’ promoter group, and was acquired by AB Nuvo, after which its name was changed.
Read the BSE announcement here.
Read the Aditya Birla Nuvo statement on the tie-up with Woori.