Sep 12, 2005, 05.40 PM IST | Source: Moneycontrol.com

Indo Gulf & Birla Global shareholders to benefit: Analysts

Analysts believe that the merger ratio put forward in the mega merger between Indian Rayon, Indo Gulf and Birla Global is favourable for the shareholders of Indo Gulf and Birla Global Finance.

The A V Birla Group has kicked off a major consolidation move, by merging Indo Gulf and Birla Global Finance into Indian Rayon .

Analysts believe that the merger ratio put forward is very positive for both, Indo Gulf Fertilisers' and Birla Global Finance's shareholders. In both these entities, the Aditya Birla Group has a large chunk.

In case of Indo Gulf, the group has 58%. Whereas, in case of Birla Global Finance they have 74%. So the ratio is pro both these companies, and the stocks clearly show that both of them have run up, says an analyst.

However, Indian Rayon is slightly on the negative side right now. The management and most of the market analysts believe that this is largely because the fertiliser company, which is Indo Gulf, has close to Rs 558 crore reserves in surplus.

As of now, there is no major avenue where this reserve could be invested. In the fertiliser business itself, the group is looking at de-bottlenecking their production capacity as of now.

Therefore, due to a lack of new avenues, they are merging Indo Gulf with Indian Rayon and looking at new businesses. This money is likely to be used for new businesses.

"I think that the rationale is very different from shareholders point of view. Indo Gulf was trapped for growth because of being in a very regulated sector, which was the fertiliser sector," said Chairman of the A V Birla Group, Kumar Mangalam Birla. 

"There was no avenue for growth. So we are migrating the shareholders of Indo Gulf to the higher growth businesses of Indian Rayon. Indian Rayon has now been renamed as Aditya Birla Nuvo," he added.

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