The document summarizes the battle between Larsen & Toubro (L&T) and Grasim Industries for control of L&T's cement business in the early 2000s. Reliance Industries first tried to acquire L&T in the late 1980s, followed by attempts from Grasim Industries starting in 2001. After negotiations and regulatory reviews, L&T and Grasim agreed in 2003 to demerge L&T's cement division, with Grasim acquiring a majority stake. The demerger was completed in July 2004, making Grasim the largest cement producer in India.

1. PREPARED BY: MOHAMMED BHARMAL
NR INSTITUTE OF BUSINESS MANAGEMENT
AHMEDABAD

2. • Larsen & Toubro • Grasim Industries
Cement

3. • The first player in this battle was Reliance
Industries Limited (RIL), in the late 1980’s.
• Armed with 10.05 percentage stake in L&T
was aspiring to acquire as a whole.
• For L&T it was life and death issue. But then
L&T was successful to fought back tooth and
nail.
• At that time major stake holder of L&T were
LIC and UTI.
• This was not all over.

4. • On November 18, 2001 the threat again raised for
L&T when RIL sold its entire stake to Grasim (A. V.
Birla group) at 46 percent higher price than
market.
• On October 13, 2002 Grasim made a public
announcement of open offer to acquire 20 percent
stake in L&T at Rs.190 per share.
• On November 8, 2002 the SEBI asked not to
proceed with this offer since it wanted to
investigate the matter.
• Further, on January 27, 2003 Grasim made a
counter proposal of vertical de-merger of cement
business to L&T board.
• Grasim valued L&T’s cement business at Rs.
130/- per share and make open offer to acquire
control the cement business / company.

5. • By April 2003, the SEBI came to conclusion
that Grasim had not violated Takeover
Code, and that its offer was valid subject to
making some additional disclosures.
• However Grasim had got only 0.38 percent
stake in open offer.
• But wit the help of its subsidiary co. it
managed to get 15.73 percent of L&T equity
capital.
• Thereafter, in June 2003 itself the L&T
management and Birla’s hammered out a
deal to carry out a structured de-merger of
cement business of L&T .

6. • It was decided that post de-merger, Grasim
will acquire the control of the resultant
cement company.
• However, L&T managed to retain certain key
assets like L&T brand, ready mix cement
(RMC) business, the gas power plant in
Andhra Pradesh, and the entire residential
and office property of the cement division.
• As a part of the scheme of de-merger L&T
was allotted 20 percent of UlraTech’s equity.
• The open offer by Grasim was meant for not
only taking control of UltraTech, but to give a
chance to FIs to bring down their stake, in the
process making hefty capital gains.

7. • In acquiring L&T’s cement business, Birla had a simple
motive of ‘growth through acquisition’
• After acquisition the combined capacity of Grasim and
UltraTech went up to 31 mn. tones, making Grasim the
largest producer in India and the eighth largest in the world.
• While Grasim was strong in the Southern markets, L&T
was strong in the rest of India. L&T’s strong distribution
network was very vital to Grasim to push its own brands
also.
• L&T was also considered as a premium brand and used to
fetch higher price. Though this brand would not be
available to Grasim in the long run, L&T allowed Grasim to
use it for more than a year post acquisition.

8. • On July 6 Larsen & Toubro and Grasim
Industries announced the completion of
the scheme of demerger L&T’s cement
division with Grasim having acquired a
majority stake in it.
Ramnath Subbu
The Hindu
Mumbai, 6 July 2004