Sceptics feel 10 per cent stake insufficient to gain stronghold in cement sector

Our Corporate Bureau

Mumbai, Nov 19: The AV Birla group has witnessed hectic M&A activity over the last one year, and Grasim picking up 10 per cent stake in L&T just about completes the icing on the cake.

Even as skeptics believe that a 10 per cent stake in the construction giant is not enough to provide Grasim the leeway, with this toehold the group is understood to be preparing a strong plan for further leveraging both backward and forward integration in cement sector.

Just five months back, AV Birla group company Indian Rayon acquired the 50.35 per cent stake of French company Groupe Bull in Bangalore-based PSI Data Systems, in an all cash deal of Rs 71 crore. Subsequently, the company made an open offer for an additional 20 per cent in PSI Data Systems.

In May this year, the group acquired Uttar Pradesh Cement Corporation by virtue of being the lone bidder.

Late last year in December, Indian Rayon acquired the global rights of Louis Philippe, Allen Solly and Peter England from Coats Viyella of the UK. The rights were acquired by Aditya Vikram Global Trading House, a wholly-owned subsidiary of Indian Rayon for $2.26 million. The move was aimed at catapulting the group’s potential to be a global player in menswear brand, overnight.

A month prior to this, Grasim had hived off its software division, Birla Consultancy Software Services, into a separate wholly-owned subsidiary called Birla Technologies Ltd. This enabled the group to operate as a niche player in sectors such as financial services, telecom and e-commerce. During this period, which witnessed a breathless M&A spree at the AV Birla Group, in October 2000, the group announced that it would merge Dharani Cements -- which it had acquired in 1998 -- with Grasim Industries, thus taking the cement capacity to 9.5 million tonne, with a direct access to the southern market.

The group has also seen divestments as part of the restructuring of non-core businesses.