Financial Daily from THE HINDU group of publications
Sunday, Feb 16, 2003
Financial Daily from THE HINDU group of publications Sunday, Feb 16, 2003 |
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Restructuring Corporate - Restructuring L&T refers cement recast plans to ICRA Our Bureau
MUMBAI, Feb. 15 THE board of directors of Larsen & Toubro today decided to appoint ICRA Ltd to study both the CDC proposal as well as Grasim's proposal for L&T's cement business, which the company proposes to demerge. The terms of reference for ICRA's study and evaluation of these proposals are yet to be worked out, said a spokesperson for L&T, shortly after the company's board meeting today. He also said there is no time frame as yet set for the evaluation to be done by ICRA Ltd. The spokesperson declined to clarify whether ICRA would be asked to specifically suggest which is the better proposal. "Both the proposals will be studied," is all he would say. The proposal of CDC Capital Partners is for issue of bonds, convertible into 6.8 per cent equity in the cement company, which is to be demerged from L&T as a subsidiary. Grasim's proposal calls for a vertical split of the cement company and for Grasim's subsequent acquisition of majority stake in it. Grasim, which has a 15 per cent stake in L&T, has been opposed to the initial proposal for demerger of the cement business, which envisages a 25 per cent stake in the cement company for L&T. Grasim's own stake in L&T's cement company would then be a mere 3.75 per cent; Grasim's central interest in L&T itself is on account of the cement business which holds the greatest synergy with Grasim's own activities. Grasim was also opposed to certain clauses in the CDC proposal. A revised CDC proposal, which was discussed during the previous board meeting of L&T, also did not meet with their favour. It is learnt that Grasim's opposition to the CDC proposal is increasingly gaining sympathy from some of the other constituents of the L&T board. In view of this, those who were advocating the CDC proposal are believed to be now persuading the institutions to consider a more "transparent" manner (such as even competitive bidding) of bringing in an investor into the company. Investor forums have earlier also insisted that the institutions should call for independent evaluations to be done. In view of all this, perhaps, ICRA has been roped in to study both the proposals, said sources. Nothing is very clear as yet, they said. Should ICRA's studies reveal that one proposal is better than the other, would it be binding on the board to accept whichever is deemed better, they wondered. The other reading of the situation is that SEBI's report on investigations into Grasim being imminent; this could change the situation entirely. Referring the matter to ICRA would then allow both parties some space.
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