The Hindu Business Line : Amendments moved at L&T EGM defeated

The results of the ballot on two major resolutions — pertaining to the demerger of L&T's cement division and its subsequent sale to Grasim Industries and the capital restructuring of L&T — are expected to be disclosed by L&T on Thursday.

Following that the procedure is that the EGM report will be filed at the High Court for its final direction for the publishing of the scheme.

Although the amendments moved by the minority shareholders on Tuesday were defeated, their opposition to the terms of the demerger has certainly put the parties to the issue on the defensive.

Sources close to the demerger process said the issue of minority shareholders' opposition is not quite closed. One door still remains open to them. When the EGM resolutions are filed in court, the procedure is that the court would issue a public notice inviting objections if any, the usual period for filing objections being 30 days. Sources said the fear that minority shareholders could file a caveat in court at that time still exists.

Just such a thing happened in the Sandvik Asia case when the Bombay High Court turned down the company's move to reduce its share capital saying it is discriminatory to small investors. It does not help in the L&T-Grasim case that the shareholder who filed an affidavit in the court in that case — Mr Janak Mathuradas — was among the most vocal of the protestors at Tuesday's EGM too.

In fact, sources close to one of the parties to the scheme of demerger said that "some quarters" felt the amendments moved at the EGM were "untenable" and in fact ought not to have been admitted by the Chair at the EGM; however they conceded that perhaps the L&T management wanted the situation to prove itself out by allowing the amendments to be debated and then rejected.

Other officials close to the demerger process said the shareholders' protest that the valuation of Cemco (the to-be-demerged cement business of L&T) has to be revised is without basis. They pointed out that in the recent case of Life Insurance Corporation's purchase of ACC at an auction some months ago, the price was based on a valuation of less $65 per tonne; whereas in the L&T-Grasim deal the price for Cemco was based on a valuation of $80 per tonne.

They claimed that just because the stock market is buoyant and L&T is quoting at levels above Rs 500 per share, the minority shareholders were "overreacting."

L&T had recently announced to the stock exchanges the outcome of the demerger process in terms of equity.

The equity capital restructuring will eventually lead to every 100 shares of L&T translating into 40 shares of face value of Rs 10 each in the cement company, and 50 shares of face value of Rs 2 each in L&T, the engineering company, a senior company official said, explaining the outcome.

More Stories on : Restructuring | Shareholder Activism

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