Grasim Industries recovered from the lower levels on Wednesday after rallying on Tuesday, exhibiting a degree of volatility.

The scrip of the cement and VSF maker edged up 0.57% to Rs 342 on BSE in afternoon trades. It had hit a low of Rs 338.05 earlier. Around 58,400 Grasim shares were traded on the counter on BSE so far. On Tuesday, the scrip had climbed 3.3% to Rs 340.05.

There's been some degree of swing on the counter over the last few trading sessions after rallying from a late-December 2002 low. The stock surged on expectations of strong Q3 results earlier. The results only enhanced the upbeat run.

Dealers attribute the current firmness on the counter to some positive development expected regarding Grasim's bid for acquiring 20% stake in L&T. The market seems upbeat without even being certain over what the developments will entail.

Grasim acquired a 15% stake in L&T. It also made an open offer to acquire 20% additional stake at Rs 190 per share in October 2002. But, in November last year, Sebi asked the Birla group company to keep its open offer on hold owing to a probe launched by the regulator on whether or not Grasim already controls L&T. Sebi's investigation of Grasim centers around the issue of whether Grasim had acquired control of L&T by taking up stake.

Meanwhile, Grasim Industries has placed an alternate proposal before the L&T board over the de-merger of the latter's cement division .

Recently, L&T said that discussions on the proposal by CDC Capital Partners for participation in the equity of a possible L&T de-merged cement unit were inconclusive.

CDC Capital Partners evinced interest in picking up a 6.8% stake in the de-merged cement entity for Rs 291 crore (Rs 2.91 billion). Originally, the offer was to expire by 30 November 2002, but was subsequently extended to 31 December 2002.

CDC has proposed to invest in convertible bonds, which could be converted into equity shares at any time until December 2004, at its option. The proposal had some tough conditions, including an option to, not only sell its entire equity stake after December 2007, but to also force L&T management to sell about 44% (51% stake together with CDC's stake) in the cement entity. CDC proposes these rights, called, drag along rights, to safeguard its interest in the cement entity. Likewise, CDC had insisted on rights to sell its stake, if L&T decides to offload shares through the secondary route between 2004 and 2007. According to this plan, CDC will get a 6.8% stake, shareholders will get 23.2% stake and L&T will have 70% in the de-merged entity.

For Q3 ended 31 December 2002, Grasim reported a 48% growth in profit after tax to Rs 132.95 crore (Rs 1.32 billion) on an 11% growth in net sales to Rs 1,166.59 crore (Rs 11.66 billion). Sales of all key divisions VSF, cement, sponge iron and fibre & pulp rose during Q3. This helped improve Q3 performance .

BSE Code: 500300