Group chairman Kumarmangalam Birla said: "The move is the group's first step in its vision for the next millenium. We hope to grow each company in revenues and earnings through a focussed leadership in the areas in which we operate, evaluating businesses against stringent value creation parameters."

Grasim's total cement capacity will increase to 10.65 million tonne. In the last six months, Grasim has announced acquisition of two ailing cement companies -- Dharani Cement and Shree Digvijay Cement.

The boards of directors of Grasim and Indian Rayon will soon meet after independent valuers appointed by the two companies present their recommendation for the share entitlement ratio.

In the proposed consolidationexercise, Indian Rayon's two cement divisions -- Rajashree Cement and Birla White -- are being transferred to Grasim. Indian Rayon will not be compensated by any cash-down payment but through shares (GDRs) of Grasim to existing shareholders (GDR holders) of Indian Rayon.

In a press release issued by the group, Birla was quoted as saying: "In the best interests of the shareholders of both these companies, it became essential to consolidate the cement businesses, so as to achieve business synergy in an increasingly competitive environment.

"An integrated and synergistic approach is vital to function more optimally in the changed scenario. Pursuant to the proposed restructuring, Grasim will emerge a much larger, vibrant and growth-oriented company with enhanced earnings potential," he added.

"The restructuring will also create value for Indian Rayon shareholders, for in addition to their shareholding in Indian Rayon, they would receive shares in Grasim as well. Indian Rayon will continue to retain itshealthy financials and have renewed focus on three core areas," Birla says in the release.