RIL not to deal in L&T shares for at least five years

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Mumbai, February 14: : The Reliance group will have nothing to do with Larsen & Toubro (L&T) shares in any way for the next five years at least. This follows a deal struck as part of the overall agreement for the sale of Reliance’s 10.05 per cent stake in L&T to Grasim.

Reliance has agreed “not to acquire or deal in shares of L&T, either by ourselves or through our subsidiaries, affiliates or associates.” The obligation, Reliance has also informed markets regulator Securities and Exchange Board of India (Sebi), is of “enduring nature and in any case shall be complied with for a minimum period of five years.”

Reliance has cited this key clause as one of the major reasons why the sale for the L&T stake was struck at a hefty 47 per cent premium to the prevailing market price. This means Reliance Industries Limited (RIL) or its associates will have nothing to do with L&T shares in any way in the coming days.

The information submitted by RIL is part of a Sebi report prepared on the L&T deal.

RIL has said the premium was, inter alia, attributable to certain covenants under the agreement and also the fact that this was a large block of shares. The other covenant was also that following the sale of the shares to Grasim, RIL’s two non-executive directors on the L&T board will inform L&T of the transactions and shall resign from the board. Subsequent to the deal, RIL’s two non-executive directors had stepped down from the L&T board. “Subsequent to the sale of the shareholding and the resignation of the two directors, RIL had no role in the subsequent changes in the composition of the board of directors of L&T Ltd and the same remained the prerogative of the shareholders of that company,” RIL said in its reply to Sebi.

RIL also has said it and JM Morgan Stanley (JMSS), which advised Grasim on the deal, have regularly been interacting on a number of corporate and capital markets-related matters for the past several months, such as their pending proposal for a secondary market global depository receipt offering for Reliance Petroleum Limited, where JMMS is a lead manager; the ongoing disinvestment of public sector units; BSES Limited, where JMMS acted as lead manager to the open offer; restructuring of third party polyester manufacturing facilities; other capital market initiatives and developments etc.