Premji picks up shares in Birla Corp

RS Lodha claims feather in cap; Birlas mum

KOLKATA: Birla Corporation, the cement and jute flagship of the MP Birla group that is at the vortex of a clash of wills between Rajendra S Lodha and the entire Birla clan, has a new investor: the richest Indian, Azim Premji of Wipro.

This was disclosed by Rajendra Lodha, the purported beneficiary of the MP Birla estate by virtue of a contested will of the late Priyamvada Birla. The Birlas have challenged the authencity of this will through several court cases filed against Lodha.

On the sidelines of the Birla Corp AGM, Lodha vowed to protect and fulfill the aspirations of the late MP Birla and `Barima’ (Priyamvada) and said that “Azim Premji has picked up about two lakh shares in Birla Corp. We all know that he is a savvy investor and this reflects the long-term value and viability of Birla Corp.” He, however, did not give any details of Premji’s investments. At Tuesday’s closing price of around Rs 326 a share, the investment would be valued at Rs 6.5 crore.

Premji’s personal investments are routed through Azim Premji Investments (API), which is believed to have a corpus of Rs 1,500 crore. API holds 2.6% equity in the Tata group’s Rallis India, 1.5% in Pfizer, 2% in JM Financial and 3.3% in Himmatsingka Seide, a textile company. API also holds sizeable investments in State Bank of India and Satyam Computers.

Till recently managed by Mrinmoy Das, API recently appointed Prakash Parthasarathy, an iGate veteran, to manage its investments.

The Premji investments were a sideshow at the Birla Corp annual general meeting, which was frequently interrupted by shouting by a section of the shareholders. This prompted Lodha to say that despite all efforts by people backed by the Birlas, the company would continue to create value.

When contacted, the Birlas, who have challenged Lodha’s continuation at the helm of the company with executive powers, refrained from commenting on Premji’s investment.

But sources in Birla Building in Kolkata said that since the matter was before the courts, all issues would be looked into by them. In fact, the Birla petition for the appointment of an administrator for the company is still being heard before the Kolkata high court.

While Lodha may see the Premji investment as an endorsement of his stewardship of the company, observers say that Premji would not have dived into the murky waters of Birla Corp without keeping returns in mind. Thanks to the Birla-Lodha ownership tussle, Birla Corp fetches a much lower price-earnings (P/E) multiple than other cement companies.

DNA Money’s research shows that Birla Corp has a P/E multiple of 15.4, while Grasim has 24.3, Ultratech 28.5 and ACC 25.7. Shree Cements, a company about Birla Corp’s size, though, has a comparable P/E of around 16.3.

Birla Corp, whose cash earnings improved substantially by 44% to Rs 178.25 crore against Rs 123.53 crore in the previous year, plans to invest around Rs 250 crore towards augmenting cement capacities. The company is also examining opportunities in real estate but no board decision has been taken as yet, according to Lodha.

Birla Corp is planning to shift its jute mill at Soorah near Kolkata to Birlapur. “This has to be relocated as Soorah is small and cannot be expanded. It has assured the government that no one will lose his job in the process of relocation.

“The cement capacity will be increased by 1.25 million tonnes at Satna in Madhya Pradesh and Chanderia in Rajasthan by debottlenecking. The entire expansion programme will be done in one-and-a-half years’ time. Talks with banks and financial institutions have begun already”, Lodha said.