Merger of Aditya Birla Capital and Aditya Birla Finance, shares rally nearly 6%

Aditya Birla Capital Ltd shares jumped nearly 6% on Tuesday, March 12, after the company announced the merger of its wholly-owned subsidiary Aditya Birla Finance Ltd with itself to comply with the Reserve Bank’s scale-based regulations for non-bank financial companies (NBFCs).

Aditya Birla Finance Ltd is an upper-layer finance company, which has been named in a list of 15 such entities by the banking regulator. RBI has directed these companies to meet its scale-based regulation (SBR) for 2023-24 and go public by September 2025.

Aditya Birla Capital, which is a holding company and a systemically important non-deposit-taking investment firm, informed exchanges that the merger has been proposed to ensure compliance with the Scale Based Regulations for NBFCs, as notified by the RBI.

Aditya Birla Finance is a non-listed non-deposit-taking systemically important NBFC.

Boards of both Aditya Birla Capital Ltd (ABCL) and Aditya Birla Finance Ltd (ABFL) approved the merger deal on March 11. The proposed amalgamation is expected to take 9-12 months to complete.

After the merger, Aditya Birla Capital will convert from a holding company to an operating NBFC. the amalgamation will lead to a unified large entity with more financial strength and flexibility providing direct access to capital, the filing stated. The merger will also make non-listed Aditya Birla Finance the first entity among the upper layer NBFCs to set a clear path for meeting the RBI's regulations.

After the completion, equity investment in ABFL by ABCL will stand cancelled and there will be no change in the shareholding, management and or control of ABCL, according to an investor presentation.

The Amalgamation Scheme will require a go ahead from the Ahmedabad Bench of NCLT and other necessary approvals from the RBI, stock exchanges, Sebi, shareholders and creditors.

ABC had more than ₹4.1 lakh crore of assets under management (AUM) as of December 2023. The AUM of ABF which primarily undertakes lending activities, was ₹98,600 crore.

ABCL shares rose by 5.81% to hit a high of ₹190.3 apiece on NSE. Around 2.1 crore shares changed hands in the first half of trading with a trading value of ₹391.78 crore.

The stock was trading 2.75% higher at ₹184.8 apiece on NSE at 12:27 pm.