AB Nuvo pounded down

Aditya Birla Nuvo is currently the top loser on the BSE. The stock opened itself at Rs.1409, breaching the lower circuit and then it slipped down further to Rs.1180. It currently remains deep in the red, down 18%.

The market is unhappy with the company’s Q1FY17 performance and wary about the merger with Grasim. On the performance front, the company’s consolidated net profit came in 57% (YoY) lower at Rs.305 crore on a flat total income of Rs.3194 crore, EBITDA slipped 31% at Rs.849 crore and margins showed a sharp fall from 20.4% to 26.6%.

On the merger front, first the financial arm – Aditya Birla Financial Services of the AB Nuvo will be demerged as a separate entity and will be listed on the stock exchanges. Then AB Nuvo will be merged with Grasim Industries. The swap ratio – for every 10 shares held of AB Nuvo, you will get three shares of Grasim.

The financial arm new entity swap ratio – for every one share of Grasim, you will get 7 shares of AB Financial. And for every 10 shares of AB Nuvo held, you will get 21 shares of AB Financial.

This new entity will be a subsidiary of Grasim, which will hold 57% stake.

The market is not very happy with the swap ratio and thus the pounding down of the stock price.