Lafarge, which recently bought out the cement division of Tata Steel, is learnt to have made the highest bid at Rs 11 per share for the 1.43 million tonne cement company.

The bid from Gujarat Ambuja is understood to be fairly close at Rs 10 per share, while Larsen & Toubro, which is now the country's largest cement maker, has offered to pay Rs 8 per share for DLF Cement. The company has an equity base of Rs 166.64 crore.

The offer price, sources say, is however incumbent upon the transfer of a sizable portion of DLF Cement's debt to the group holding company, DLF Universal. The total debt outstandings of DLF Cement is around Rs 400 crore, which proved to be the contentious issue in takeover negotiations earlier.

DLF officials were, however, not available for comment on the latest bid to sell-out the cementcompany.

The official spokesperson of Lafarge said: "We would not like to comment on a speculative issue."

At the Bombay Stock Exchange, the DLF Cement stock which opened at Rs 10.25 shot up to close at Rs 11.10 per share.

ICICI, the lead institution, had earlier asked group holding company DLF Universal to take over debt worth Rs 130 crores of its ailing subsidiary DLF Cements on its books.

Even if the debt aggregating Rs 130 crores is transferred to the closely-held company, Lafarge's bid of Rs 11 per share will translate into a total consideration of Rs 2,700 per tonne, which is reasonably high for a Rajasthan-based cement facility.

"An offer price of Rs 2,700 per tonne seems to be on the higher side, as DLF Cement is constrained by locational problems. Cement units in the Rajasthan region do not command more than Rs 2,500 per tonne, and the offer price may be considered high even if Rs 130 crore of debt is transferred out of the books," said a cement analyst.

ICICI had recently told DLFpromoter Rajiv Singh that the the transfer of the debt to DLF Universal would help fetch a better price for DLF Cement and greatly improve the company's debt-equity ratio. The DLF group was, however, not too keen to effect the debt transfer as it felt the transaction would affect the financials of the closely-held DLF Universal, which is among the largest real estate developers in North India with a networth of around Rs 5,000 crores.

DLF Cement has been on the look-out for a buyer for sometime. Talks with Gujarat Ambuja Cement and the Binani group fell through some time ago due to reported differences on the price front.

The company, whose plant is located at Pali in Rajasthan, incurred net loss of Rs 52 crores in 1997-98 and has been facing a serious cash flow problem. The turnover stood at a modest Rs 245 crore. During the first quarter of the next fiscal ended June 30, 1998, DLF Cement reported a loss of Rs 14 crore.

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Help change the perception

It is clear that the changein management control will trigger an open offer. On being taken over, the prospects for the company may not improve overnight but the perception most certainly would. The two major problems are the location of the plant and the debt:equity ratio.

It appears that the price offered has been arrived at after adjusting for a massive debt reduction. Rajasthan is a cement surplus state which serves another surplus state--Gujarat. Considering the price paid by L&T for Narmada Cements, (which can serve the lucrative Mumbai market), after adjusting for freight, the price differential is not significant. However, DLF has a significant tax shelter but the huge equity is unserviceable. After adjusting for the likely transfer of debt, the acquisition price per tonne is unlikely to be above Rs 2200.

Urmik Chhaya