Group sources, however, declined to get involved in any discussion on the subject. "The two businesses are not seen as core areas, but are still part of the companies," they said.

Both the divisions have been rumoured as possible sell-offs in view of a larger restructuring of the group's operations. Senior Grasim and Indian Rayon officials have been reiterating over the last six months on their plans of consolidation of core areas, but have chosen not to comment on the non-core ones.

An AV Birla group release, issued on Wednesday to declare the consolidation of its cement operations, identified Grasim's core businesses as cement, VSF and textiles, and that of Indian Rayon as VFY, Insulators and carbon block.

Grasim'sRs 460-crore sponge iron division has an installed capacity of 7.5 lakh tonne and produced 7.06 lakh tonnes during 1997-98. It had recorded a turnover of Rs 376 crore in the previous fiscal. The company has also announced increasing its capacity to nine lakh tonne.

Industry sources said that Grasim may find it difficult to find a buyer for the division as the steel industry is at present going through its worst-ever crisis. The secondary market, which uses the DRI, has been the worst hit.

At the same time, Vikram Ispat has two major advantages: first, it produces quality DRI with the aid of technology from Hylsa and, secondly, a captive jetty that can accommodate deep sea vessels.

The division, last fiscal, had registered exported worth Rs 160 crore, which accounted for 80 per cent of India's HBI exports.

Indian Rayon's sea water magnesia division was set up at a cost of Rs 383 crore -- a cost overrun of over Rs 100 crore, and a time overrun of over a year.

Although India's sea water magnesiarequirement is being met, at present, through imports, the company is facing competition from cheaper imports of Chinese fused magnesia and sea water magnesia, Indian Rayon's annual report says.

Double deal for Grasim?

The deal throws up a crucial question: can Grasim subscribe to Grasim shares, which, under the terms of transaction, it is entitled to? The answer, according to the Companies Act, is an unequivocal `no'.

Is the result, then, a double deal for Grasim, where it gets the cement assets, and pays out less than the full estimated value of those assets?

Grasim holds equity worth Rs 38.10 crore in Indian Rayon's equity of Rs 67.48 crore. This accounts for more than a 60 per cent holding.

Under the terms of the transaction proposed, Indian Rayon shareholders will be given Grasim shares at a "fair" exchange rate to be arrived at after the crucial board meetings on September 21. Can Grasim shares be issued to Grasim--or since they cannot be, can the amount payable reduce to that extent?If it does, it will, by implication, be an inflow into the company, in addition to the proposed transfer of cement division assets. Does this load the deal too heavily in favour of Grasim? As of now, with Grasim and Indian Rayon executives staying tightlipped, the group has not answered this crucial question in its press release.