Larsen & Toubro Ltd (L&T) on Thursday sold its residual 11.49% stake in UltraTech Cement Ltd to domestic and foreign institutional investors through an open market transaction for an estimated Rs 1,036 crore. Although Grasim, since it already has a controlling stake (50.7%) in UltraTech Cement, had the right of first refusal, it was not willing to buy L&T’s stake. L&T sold 14.3 million shares, representing 11.49% stake, UltraTech said in its filing to the Bombay Stock Exchange (BSE). The stake sale is part of L&T?s strategy to exit non-core business. Shares of L&T ended lower by 0.55% to Rs 1,624.70 on the BSE.

Shares of UltraTech Cement also declined by over 3.66% to Rs 735.20 after L&T sold its complete stake. The sale was carried out at an average price of around Rs 725 per share.

According to experts, ?The sale of its complete stake in Ultratech Cement Limited is in accordance with L&T?s obligations under its agreement with Grasim, and is also in line with L&T?s strategy of focusing on its core business. In its efforts to get the best value for its shareholders, the company decided that the present market conditions were correct for disinvestments of its stake.?

In November 2001, Aditya Birla group company Grasim Industries Ltd acquired over 10% in L&T from Reliance Industries Ltd. Following this, Grasim hiked its stake in L&T to almost 16% through an open offer. Then in 2004, L&T, after a prolonged battle for the control of its cement business, had hived it off as UltraTech Cement and transferred the management control to Aditya Birla Group’s Grasim. Meanwhile, both the companies entered into an arrangement, whereby the cement business was transferred to Grasim even as L&T retained 11.49% of its stake in UltraTech. Conversely, Grasim and its associates sold 14.95% of their holding in the de-merged L&T to the L&T employee welfare foundation, retaining the balance stake in the company.

Similarly, L&T in May last year sold its ready mix concrete (RMC) business to French major Lafarge as a part of its exit from non-core businesses. The deal, which was valued for Rs 1,480 crore ($349 mn), gave Lafarge a 25% market share in RMC business in the country.

For the year ended March 31, 2009, L&T posted a 63% increase in net profit at Rs 3,789.46 crore as against Rs 2,325.36 crore. Sales grew 38% at Rs 41,055 crore as against Rs 29,847 crore against the backdrop of strong order flow of infrastructure projects despite a financial downturn. For the fourth quarter, it posted a marginal increase of 3.3% in its net profit at Rs 999 crore as against Rs 967 crore in the corresponding period a year ago. The company said its net profit was weighed down by a provision of Rs 185 crore for its investments in Satyam Computer Services.

•L&T sold 14.3 m shares at an average price of around Rs 725 per share

•Stake sale is part of L&T?s strategy to exit non-core business

• Grasim, the majority stakeholder with 50.7% stake, gave no objection for the deal

• L&T had in May 2008 sold its RMC business to Lafarge for Rs 1,480 crore