AB Capital to merge finance arm with itself

Aditya Birla Finance, a systemically important nonbanking financial company (NBFC), is set to merge with its parent Aditya Birla Capital (ABCL) in about a year's time to create a large unified NBFC.

This will increase total capital adequacy by approximately 150 basis points (bps) and reduce leverage to 4.15 per cent for the amalgamated entity on a proforma basis

The proposed amalgamation will result in compliance with the scale-based regulations of the Reserve Bank of India (RBI), which require mandatory listing of Aditya Birla Finance by September 30, 2025, ABCL said in a statement on Monday. The amalgamation is subject to regulatory and other approvals as may be required.

Kumar Mangalam Birla, chairman of Aditya Birla Group, said that the financial services business has scaled smartly to emerge as a core growth engine for the Aditya Birla Group.

The proposed amalgamation will create a strong capital base for Aditya Birla Capital to grow its business and participate in India’s growth story, he added.

This is the second instance of such a merger in the NBFC space. Earlier, Tata Capital Financial Services merged with its parent entity Tata Capital from January 1, 2024. Tata Capital, which is the holding company, is yet to be listed on the stock exchange.

Upon the scheme becoming effective, Vishakha Mulye will become managing director (MD) & chief executive officer (CEO) while Rakesh Singh will be executive director and CEO (NBFC) of the amalgamated Birla company. Mulye is currently CEO of ABCL and Singh is MD & CEO of Aditya Birla Finance.

Mulye, in an analysts’ call, said when the company raised capital of ~3,000 crore, it had said it would be sufficient for 18-24 months.