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Tuesday, Mar 23, 2004

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FIIs silent on L&T cement demerger amendments

Kripa Raman

Mumbai , March 22

FOREIGN institutional investors can sometimes think and operate quite differently from their Indian counterparts. The shareholder poll on the amendments moved by minority shareholders to the main resolutions at the court-convened meeting of Larsen & Toubro on February 3 this year rather illustrates this point.

The poll papers show that most of the FIIs who were represented at the meeting abstained from voting on the amendments moved by the minority shareholders although they voted in favour of all the main resolutions. The Indian institutions, voted against the amendments while voting for the main resolutions.

The main resolutions pertained to the demerger of L&T's cement division, the sale of a stake in it to Grasim Industries followed by Grasim's open offer for it and the sale by Grasim Industries of its almost 15 per cent stake in L&T to the employees trust of L&T at Rs 120 per share.

The first amendment was that the nearly 15 per cent stake of Grasim in L&T ought to be bought directly by L&T as a buyback or offered as rights to L&T's existing shareholders. The second was that Grasim's open offer for sale of shares in UltraTech Cemco (the demerged cement company) ought to be made only after Cemco is listed and has traded for more than three months on the stock exchanges.

In this context, it may be concluded that those who voted in favour of the main resolutions but abstained from voting instead did not want to be questioned later about their choice, which would be on record.

Some of the FIIs which abstained from voting on the resolutions were Pacific Select Fund a/c Emerging Markets; State Street Bank and Trust Company a/c Emerging Markets Common Trust; SSgA Funds Management Inc, Emerging Markets Fund; Oppenheimer Funds Inc; Founders Asset Management; Capital International Emerging Markets Fund; Tenessee Consolidated Retirement System; Batterymarch Financial Management Inc, a Mason Emerging Markets Trust; Vanguard Emerging Markets Stock Index Fund and the like.

They have all voted in favour of the main resolutions, but their names do not appear in the poll results on the voting on the amendments, suggesting that they have abstained.

All the Indian institutions, such as UTI, LIC, GIC, as well as all their group funds such as UTI-Index Lined Plan, UTI Indian Fund Unit Scheme 1986, UTI-Index Select Fund, UTI-Master Equity Plan Unit Scheme, UTI-Children's Career Plan, UTI-Mastergain Unit Scheme voted against the amendments.

A handful of foreign funds did vote against the amendments. For some of them such as Lloyd George Investment Management Fund and New York State Common Retirement Fund which voted against the amendments, one Mr A.M. Naik was proxy. The rest of the FII stakeholders were not present at the meeting.

Overall, the five amendments were defeated by 13 crore votes against, as opposed to 22,727 votes in favour. Roughly 14 crore votes were represented at the meeting on February 3; those abstaining (almost all of them FIIs) and present constitute nearly 1 crore votes or around 4 per cent of the total shareholding of the company.

With the FII stake in L&T being 13.44 per cent, almost the entire 4 per cent FII stake in the company abstained from voting. The rest, by virtue of being absent, also abstained from voting, preferring to be silent on the issue of whether they want the amendments or not.

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