Kumar Mangalam Birla faces shareholders heat over Century Textile unit demerger

Kumar Mangalam Birla’s move to demerge the cement arm of Century Textile faced a stiff opposition at the shareholders’ meeting with over 23% of voting public shareholders opposing the scheme.

The votes of public shareholders against the demerger scheme on Wednesday also include those of M P Birla Group owned by the Lodhas of Kolkata, sources said.

Lodha family-controlled investment company Punjab Produce and Trading Co had earlier gone to court with a plea for an injunction on the demerger, claiming that the move would hurt its interest as Century Textile would be left poorer as its main revenue earning business division would be taken away.

It now appears that not only the Lodhas, but a large segment of minority public shareholders were also not happy with the cement division being taken away and merged with UltraTech, the cement behemoth of the K M Birla Group.

Data revealed by Century Textile on the voting pattern shows that 25.18% of public shareholders who voted opposed the scheme through the e-voting option while 23.21% of total votes pulled from public shareholders, including voting done through the electronic mode as well as physical votes at the meeting of the shareholders, were against the resolution.

In terms of the Sebi circular and order of National Company Law Tribunal (NCLT), the scheme was required to be approved by the majority of the public shareholders of the company, and accordingly voting by public shareholders were carried out through postal ballot and remote e-voting.
A significant portion of financial institutions who voted on the resolution, 16.71% expressed displeasure on the proposal, the voting pattern data showed.

nstitutions hold 26.09%, including mutual funds, which own 14.37% stake in Century Textile including Life Insurance Corporation (LIC), funds of Goldman Sachs, Kotak, HDFC and L&T Mutual Fund.

But with the promoters holding 50.21% total shares, the proposal got a smooth ride and would now get approval from NCLT.

The Lodhas own 1.62% in Century Textile through their flagship group outfit Birla Corp.

Their investment arm Punjab Produce and Trading Co owns 17.52% of Pilani Investment, the Kumar Mangalam Birla-owned holding and investment entity.

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Pilani, in turn, holds a 33.11% stake in Century Textile creating significant indirect interest of the Lodhas in Century which will now lose half of its revenues post the demerger.

Source: DNA Money