Birla Seeks Full Details Of L&T Cement Demerger

Mumbai, November 27: | Updated: Nov 28 2002, 05:30am hrs
In a clear signal that the AV Birla group will not easily let go off Larsen & Toubros (L&T) cement business, it has now been revealed that group chairman Kumar Mangalam Birla has written a letter to L&T managing director and chief executive officer AM Naik, stating that full details of the demerger proposal be sent to all the directors to enable them to study the matter. The letter was written subsequent to the crucial L&T board meeting of October 29, where the demerger proposal was revived.

L&T Cementing International Operations

Mumbai: L&T is aggressively pushing its international business plans in the midst of its cement demerger proposal.
Senior L&T officials say revenues from its international business are expected to grow to about 25 per cent in the next 2-3 years.
Last year, the revenue contribution from the international business was 12 per cent, and in the current fiscal, it is expected to increase to 17 per cent, officials said.

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The issue relating to the demerger of the cement business came up before the board for the first time by way of supplementary agenda dated October 28, 2002 - after the public announcement on October 14, 02 - in the meeting held on October 29. This item in a supplementary agenda dated October 28 was sought to be introduced just before the close of the board meeting and was recorded by Mr Birla by a letter dated November 1, 02 with a request that full details of the proposal be sent to all the directors to enable them to study the matter, Grasim Industries said in its rejoinder to the Sebi affidavit filed on Tuesday, before the Securities Appellate Tribunal on Wednesday.

The tribunal, which heard both the parties, will pronounce its judgement by Friday.

Mr Naik, in his reply dated November 9, 02, justified the last-minute inclusion of this item on the ground that the matter was required to be kept confidential as it was of a price sensitive nature. But, even subsequently, he still did not furnish the required details, Grasim said in its rejoinder.

The attitude of L&T subsequently conclusively establishes that there is no form of control exercised by the appellants (Grasim) directly or otherwise through its directors over L&T, Grasim counsel Goolam Vahanvati, who is also the Maharashtra advocate general, submitted before SAT.

Interestingly, a top L&T official and member of the companys board, told FE that the decision to set up a committee to look into the cement demerger proposal was unanimous, with approvals from the two AV Birla group representatives - Kumar Mangalam Birla and Rajashree Birla.

Mr Birla has also stated in the letter to Mr Naik that an important matter like the cement business restructuring required detailed deliberations, said Mr Vahanvati.

The issue of submission of a term-sheet by Commonwealth Development Corporation (CDC) for acquiring a strategic investors stake in the cement business also cropped up during the board meeting.

Mr Naiks reply to Mr Birlas letter also said the board had decided to recast the cement business as long back as October 2000 and a strategic partner could not be inducted for a variety of reasons.

Subsequently, some financial investors had approached L&T, out of which the CDC proposal is currently being studied by the committee.

The hearing, which began at noon, was subsequently adjourned by an hour and half to enable Sebi counsel Rafiq Dada to study Grasims rejoinder.

The Sebi counsel argued that the primary issue was whether there was a case for investigation in the matter or not.

The hearing was attended by the entire Grasim brass, including Birla Management Corporation director Saurabh Misra, Grasim group executive president and chief financial officer DD Rathi and AV Birla group chief financial officer Sumant Sinha.