KM Birla wants to shed promoter tag in Kesoram
The Aditya Birla group chairman seeks to be reclassified as a public shareholder
Kumar Mangalam Birla, chairman of the Aditya Birla group (ABG), has written to the Securities and Exchange Board of India (Sebi), seeking reclassification from a promoter to a public shareholder in Kesoram Industries, a BK Birla group company.
Kumar Mangalam’s grandfather BK Birla, had at one point wanted to hand over charge of Kesoram to him. Later, BK Birla’s daughter Manjushree Khaitan was made executive vice-chairperson. BK Birla continues to be the chairman. In the letter, he said: “With the increasing operational and regulatory complexities, I find that my classification as a promoter of companies other than those of the Aditya Birla Group, would have compliance challenges. Many a times, there is an impression created in the minds of regulators and other stakeholders that companies other than the ABG are also controlled by promoters of ABG.”
He highlighted that during the recent acquisitions of JP Cement’s plants as well as Century Textiles and Industries’ cement business by UltraTech, an ABG company, the Competition Commission of India (CCI) had served a show-cause notice for not declaring Century Textiles or Kesoram as jointly managed by ABG. According to filings with the BSE, Kumar Mangalam directly holds 300 shares in Kesoram. His entire holding, including family and entities, is less than 0.0035 per cent in Kesoram Industries, which is a company forming part of B K Birla Group.
As on December 2018, in Century Textiles, Pilani Investment and Industries Corporation holds 33.11 per cent while in Kesoram Industries, its holding is 19.17 per cent. Besides, B K Birla, the promoter of Kesoram Industries, owns 0.18 per cent directly in Century Textiles. Century Textiles, in turn, has a 3.59 per cent stake in Kesoram Industries. Unlike Kesoram, in Century — also a BK Birla group company — Kumar Mangalam was inducted to the board in 2006. In 2015, he became the vice-chairman.
The letter to Sebi mentions that the recent changes under the Companies Act, Sebi (Issue of Capital and Disclosure Requirements) Regulation 2018 and Insolvency and Bankruptcy Code (IBC) 2018 make it cumbersome for companies of ABG to comply and hence creates compliance complications. Kesoram had come close to being declared potentially sick under the Board for Industrial and Financial Reconstruction in 2016. A web of transactions and fund infusion from the promoters had saved it from the brink of a BIFR referral. As on date, the company’s debt is around ~3,600 crore.
Kesoram is looking at strengthening its tyre manufacturing business by demerging it and exploring the possibility of a strategic partnership, said sources. The demerger is awaiting Sebi approval.
Kumar Mangalam also stated in the letter that he has no direct or indirect managerial or other control in Kesoram and does not enjoy any special rights therein. The letter said that some of his family members, including himself, were also declared and continued to be declared promoters in a few companies that are not part of the ABG and have been managed independently.
Kumar Mangalam, his family members and entities controlled by them hold less than 10 per cent stake in companies like Kesoram.
Founded by the late GD Birla and his brothers, the Birla group of Industries fragmented into groups over a period of time headed by the children of GD Birla and his brothers to independently manage various companies. Apart from ABG, other groups of the Birlas include the BK Birla group, KK Birla group, SK Birla group, GP Birla group (now known as CK Birla group) and others, stated the letter.
During the formative years of these groups, many members of the Birla family were declared as promoters in various companies in public offers and other documents, it added.