Aditya Birla Chemicals' merger with Grasim

Aditya Birla Chemicals (ABCIL) is merging with Grasim, on a share swap ratio of 1 share of Grasim for every 16 shares held in ABCIL. This Swap ratio is seen grossly unfair to the minority shareholders of ABCIL. This kind of move was never expected from a Group like AV Birla Group.

ABCIL’s present book value is seen at Rs.190 per share, with annualised EPS seen at around Rs.20 per share. Grasim’s present consolidated book value is at Rs.2,600 with annualised EPS of Rs.220. Both have FV of Rs.10 per share. So based on earning and book value, average swap ratio should have been at around 12 or 13 shares of ABCIL for 1 share of Grasim.

ABCIL is having 3 caustic soda manufacturing plants based on membrane cell technology, with total capacity of 2,93,000 TPA. Company has also signed a business transfer agreement for 59,000 TPA caustic soda plant with Jayshree Chemicals. Hence, 4 plants are existing in Jharkhand, UP, Karnataka and Odisha. ABCIL is also having captive power plant of 110 MW. Power and Salt are the key inputs for caustic soda plant, thus having assured supply of feed-stock. Net worth of ABCIL is at Rs.450 crore, while has net debt of Rs.900 crore, of which, Rs.250 crore is availed for working capital.