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L&T demerger gains ground

Rumi Dutta in Mumbai

Independent directors on the board of Larsen & Toubro are gearing up to push for the demerger of the company's cement business as approved earlier by the board.

The L&T board had given the go-ahead for the demerger at two meetings in July and October 2000, but the process was deferred with the Birlas picking up a large stake in the company and joining its board.

"Given the current scenario, the L&T board needs to identify the potential areas of difference and work on the options available that can put things back on track. The first thing will be to demerge the cement business as structured and approved by the board earlier," a source close to the L&T board said.

"Only after hiving off the cement business can L&T and Grasim sit down and discuss issues like operational synergies and common marketing," a source added.

L&T has incorporated a company, L&T Cement, into which the cement business is to be hived off.

With the Birlas joining the L&T board last year, three multinational bidders had exited from the race.

L&T subsequently began discussions with several private equity funds, but these talks too came to a standstill.

"The proposal now is for one or more equity funds as strategic investors in the demerged cement business. We would like to see this proposal placed before the L&T board at the next meeting," a source said.

The L&T management can appoint an external agency to work on the demerger plan.

Earlier, the company had mandated DSP Merrill Lynch to work on the proposal.

No decision at FIs' meeting

The meeting of the financial institutions on Friday to review the presence of the Birlas on the Larsen & Toubro board and other issues related to the open offer price remained inconclusive.

"We took stock of the situation, but no decision was taken about restructuring the board or the open offer price," an FI official said.

"Since legally we cannot contest the open offer price, we will wait for the Securities Appellate Tribunal's decision," said the official.

FIs reiterated their decision not to tender their shares at the open offer price of Rs 190 a share.

However, some institutions are hiking their stakes in L&T through open market purchases.

Ultimately, the FIs might take their combined stake beyond 51 per cent to gain majority control, officials said.

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