BK Birla Group shares gain on revamp hopes

MUMBAI: Shares of BK Birla Group companies have run up of late amid heightened speculation that the industrial house is planning a major restructuring that could result in the sale of some businesses. Though the group is yet to talk about such plans, brokers and traders are convinced that the recent rally in the group’s stock prices is due to the likely revamp. “The re-structuring may be a certainty, but timing nobody would be able to judge,” said Ramdeo Agarwal, joint managing director, Motilal Oswal Financial Services.

Shares of Century Textiles and Industries have jumped 54% in the last two months to a record level of Rs 734 on Wednesday. Kesoram Industries has gained 12% during the same period. The mid-cap index has risen less than 3% in this period.

“There is high possibility of a restructuring at the BK Birla Group,” said Deven Choksey, MD, KR Choksey Shares and Securities. “However, how much time it would take, nobody knows and the group has not spelt out the strategy.”

Century Textiles holds the group’s real estate, cement, textiles and paper making businesses. The market is abuzz with speculation that the group may be looking to sell the cement business to Kumar Mangalam Birla-led Aditya Birla Group’s UltraTech Cements. BK Birla, 92, is Kumar Mangalam Birla’s grandfather. Kumar Managalam Birla’s stake in Century rose by 8% at the start of this month after he converted warrants allotted to him by the board to 8.47 million shares.

“Consolidation in cement business is the move in the right direction as it would boost profitability of UltraTech and give a clear focus to Century and create larger value for the group,” said Choksey.

Brokers are speculating that there could be a change in shareholding even in the paper making and textiles businesses, while Century would focus fully on real estate.

Century has a major land bank in Mumbai and Kalyan. In Mumbai, Century, reportedly, has already started development at Parel where it may sell more than 25 lakh square feet of commercial and residential space. The company has land bank worth around Rs 500-crore at Sahahad at Kalyan.

Brokers expect the restructuring to be mostly all-share deals, which investors believe is good for the long-term prospects of companies in the BK Birla Group.