Aditya Birla Group firm Grasim Industries has proposed to increase foreign portfolio investors’ investment limit to 45 per cent from 30 per cent to enhance its weightage in the indices floated by Morgan Stanley and other large global financial institutions.
The move will attract fresh investment in the stock from large foreign pension funds which mimic the index for their investment strategy.
The current FPI investors in the company include Aberdeen Emerging Markets Fund, Aberdeen Global India Equity, New World Fund Inc and Citi Bank NA New York besides a clutch of foreign depositories.
Morgan Stanley Capital International created its first global index in 1968 and now manages about 1.60 lakh indices including country-specific and various sectors. Leading mutual funds and ETFs across the globe benchmark their returns to MSCI indices while pension funds invest in companies included the index to deliver equivalent returns.
Each MSCI index select stocks that have high liquidity, active investors participation and less intervention by the promoters.
Aditya Birla Group is in the midst of reorganisation of the promoters holding in the group company. It is in the process of merging Aditya Birla Nuvo with Grasim Industries and spinning off the financial services including mutual fund, NBFC, life insurance and business as Aditya Birla Financial Services into a listed entity.
Dividend policyLast October, the company split the face value of the equity shares to ₹2 each from ₹10 each as a pre-cursor to the proposed merger and listing of the financial services business.
Post-restructuring, Grasim will have a consolidated annual turnover of ₹61,500 crore with 68 per cent contribution from manufacturing sector which includes cement, textile, chemicals, insulator and solar and 32 per cent from financial services and telecom.
Besides increase in liquidity for foreign investors, the defined dividend policy of Grasim will also make it a strong contender for its inclusion in various global indices.
Sushil Agarwal, Whole-Time Director & CFO, Grasim Industries, told BusinessLine recently that the board has agreed to distribute 25-45 per cent of the company’s profit as dividend a year at the prerogative of the board.
“The board will take a call on the dividend on quarterly basis after considering business prospects including company’s performance, cash flow, growth opportunities, capital expenditure and overall liquidity position,” he said.