The strategic partner will reach a level of equal shareholding with L&T through a combination of secondary purchases and infusion of capital in LTCL over a period of time.

L&T will also consider a proposal to merge L&T's subsidiary Narmada Cement Company Limited with LTCL, subject to approval of the board and shareholders of NCCL.

L&T's investment bankers DSP Merrill Lynch and JP Morgan presented the recommendations to the L&T board on Wednesday which the board broadly accepted.

It may be mentioned that the board had previously approved the demerger of the cement business and directed the management to come up with a detailed structure for the cement company.

The focus of the entire exercise is to unlock maximum value for L&T's shareholders and meet capital requirements of LTCL for growth, the release added.

L&T's cement division achieved sales of Rs 1,935 crore for 1999-2000. The cement sector accounts for 26 per cent of L&T's sales.

L&T acquired Narmada Cement Company Limited in April 1999, adding 1.2 million metric tonnes of capacity. Subsequent to the acquisition, the company took various initiatives to improve the production and productivity of the three units of NCCL.

Talks of roping in a strategic partner have also been on the anvil for quite some time, with HolderBank and Cemex being named as possible partners. Industry analysts believe there are several benefits from the demerger. L&T will rid itself of a cyclical business, which had, in recent years, put tremendous pressure on its bottomline. The pressure was in terms of losses due to intense competition in the marketplace. Further, the large borrowings taken by the company to fund the capacity expansion took their toll in the form of a higher interest burden. A key fallout of the decision to demerge would be the unlocking of the value of its highly profitable engineering and construction businesses.