Hinduja: NXTDigital-HLF merger to create value for all shareholders: Hinduja – Blue Barrows

Mumbai: Merger of unlisted Hinduja Leyland Finance (HLF), a non-banking lender and material subsidiary of Ashok Leyland, into NXTDigital will be a value creator for shareholders of both the truck maker and NXTDigital, said Dheeraj Hinduja, executive chairman of Ashok Leyland.

The Hinduja Group has announced a restructuring of a few group entities where listed firm NXTDigital will transfer its digital and communications business to

Global Solutions and then absorb the unlisted HLF through a merger scheme.

Once the merger is completed in the next 6-9 months, subject to regulatory and shareholders approvals, HLF will get a benchmark in terms of valuation that will also reflect in Ashok Leyland’s valuation, Hinduja told ET. “Post listing, the company will be quite sizable in the NBFC space and will unlock the true potential value of its several businesses,” he said.

Boards of HLF and NXTDigital approved the merger and share swap ratio last week. As per the scheme, shareholders of HLF will get 23 fully paid equity shares of the face value of ₹10 per share in NXTDigital for every 10 fully paid equity shares of the face value of ₹10 each held by them in HLF.

“A few valuation synergies can also arise from the non-bank lender’s wholly-owned subsidiary Hinduja Housing Finance and digital subsidiaries, which have forayed into niche areas such as online marketplace for used vehicles, insurance broking, and digital platforms,” Hinduja said. “With an asset-light model, such businesses are valued at a higher premium due to their future growth potential.”

Sachin Pillai, managing director of HLF, said, “The company will raise around ₹940 crore from qualified institutional placement (QIP) next month. Funds will be used for funding business activity and maintaining the capital adequacy ratio.”

Ashok Leyland currently holds a 68.8% stake in HLF, which will be reduced to 58% upon the completion of the merger. The promoters and promoter group entities will have a 75% stake in the new entity while 25% will be held by public shareholders, including those institutional investors who will be granted shares in the QIP.

Shares of Ashok Leyland have gained 27% in the last six months compared to a 5.4% rise in benchmark Nifty. NXTDigital shares have rallied 21% during this period.

Currently, Hinduja Group owns a 64.67% stake in NXTDigital, while domestic institutions and foreign portfolio investors own 10% and 5.33% stake, respectively.

HLF filed a draft red herring prospectus (DRHP) twice in the past and got Sebi’s approval for an initial public offering (IPO) as well. According to analysts tracking the primary market, it did not go ahead with the IPO in 2016 due to economic conditions post demonetisation, and later in 2018, because of the NBFC crisis precipitated by the fall of IL&FS.