The Hindu Business Line : `L&T staff won't gain from shares held by Trust'

EMPLOYEES of Larsen & Toubro will not profit from appreciation or otherwise of the shares held by employees' trust, which was created to buy over Grasim's nearly 16 per cent share in L&T in the demerger deal, said Mr A.M. Naik, Chairman & Managing Director, L&T.

"The shares are not going to be sold," he said. "Any value that can be realised cannot get sold to anybody."

There is a misunderstanding among some quarters that employees are going to benefit by profiting from the money that the company has invested and that the retail shareholders are going to lose out, said Mr Naik. "But the shares, as of now, are going to be held in perpetuity by the Trust," he said.

He said an external loan of Rs 200 crore has been taken for the Trust, and an interest-free loan of up to Rs 207 crore is being given to the Trust by L&T. These loans would take 10 to 12 years to get repaid, the amounts coming from dividend earned and suchlike, he added. If at all the shares are going to be sold, it can happen only after the loans have been repaid.

The employees are currently contributing 3 per cent to 5 per cent of their salary on a completely voluntary basis.

Mr Naik said it was their sense of patriotism that made them make an investment which would get them 5 per cent interest when pension would have fetched them 7 per cent interest. "All we have guaranteed the employees is 5 per cent return on their investment."

He said the objective of creating the Trust was the most prudent alternative.

If the entire block of 16 per cent stake in the company was sold in the market, this would have eaten into its price and created a loss for the retail investor.

Even if the sale had happened in lots over a year or two, erosion of market price would have happened, he said.

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