This brings to an end the battle between the ICL promoter N Srinivasan and the septuagenarian Raju, which began with the hostile takeover of Raasi Cements by the former in December 1997. This deal will mark the exit of Raju's family from the cement business.

According to the "compromise settlement" reached between the two parties, ICL, along with group company ICL Securities, has acquired 88.5 per cent shares of Sri Vishnu Cements, held by Raju and his associates, for a consideration of Rs 115 crore. The equity bought out also includes the disputed 39.5 per cent equity, which was held by Raasi Cements but transferred to Raju's associates to ward off a takeover threat from Srinivasan.

For the balance 11.5 per cent, ICL will make an open offer to buyout the minority shareholders. The one million tonne Sri Vishnu Cements has an equity base of Rs 23.7 crore.

The acquisition will be funded through issue of preference shares and a fresh issue of equity shares which will be privately placed. In a release, ICL has said that it will resort to bridge finance in the interim period.

"Our intention is to eventually merge the company with India Cements. The acquisition will further strengthen our leadership position in the South," ICL managing director N Srinivasan said.

The latest acquisition, brokered by Lazard Credit Capital, makes Srinivasan the undisputed cement czar in South India with over a 30 per cent share of the market. Sri Vishnu Cement has a production capacity of one million tonnes and the buyout will raise ICL's cement capacity to nine million tonnes.

Justifying the takeover Srinivasan said the acquisition has brought an asset worth Rs 350 crore at a cost of just under half the investment.

Raju attributed his decision to his advancing age and lack of interest by his heirs in the cement industry.

INSIGHT
Size does not matter

It would have taken any number of years for BV Raju to recover his investment made in Sri Vishnu Cements since a one million tonne unit in Andhra Pradesh could have proved unviable. He has thus opted for a sensible alternative. The Sebi judgement has established a precedent that even after an open offer has been made, one can transfer the controlling stake in a key subsidiary . The deal will enhance the margin by which ICL will be the largest cement company in the south. However, it needs to be remembered that capacity is no substitute for efficieny, particularly with impending entry of Gujarat Ambuja in the south through a packaging unit in Tamil Nadu as well as cement units AP and in Chandrapur.

-- Urmik Chhaya