The Telegraph
Since 1st March, 1999
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Guessing game on next Birla gamble

Mumbai, March 14: Securities and Exchange Board of India’s (Sebi) acceptance of Grasim Industries’ swoop on Larsen & Toubro (L&T) has left a trail of unanswered questions over the Birlas’ next gamble.

Grasim, free to make a revised open offer now, has to decide which way to go on key issues like the initial offer price and cement de-merger. A section of observers is of the opinion that the no-objection sign from Sebi might already prove to be a case of too little, too late.

The Birlas, they reckon, might not consider making a fresh offer the most important thing at the moment, having won over sizeable stakes and the tacit approval from financial institutions on splitting L&T’s cement unit.

Others say what Grasim offers jilted shareholders this time will depend largely on just how much it values cement. The Birlas, who favour a vertical split of the division, have indicated a price of Rs 130 per share for the new company that will be spun off; the rest of L&T’s business has been valued at Rs 162.50 per share.

It has to be seen whether Grasim retains its initial open offer price of Rs 190 per share, or raises it to Rs 292.50 — the figure capturing the value of undivided L&T.

Industry watchers say choosing the second option will mean that putting de-merger scheme on back-burner.

Another scenario could look like this: there is no change in the open offer price, there is a push for de-merger; then, there is an offer at a price of Rs 130 per share.

Sources say the Birlas could also wait for the report of Icra, which was picked by the L&T board last month to evaluate proposals put forward by Grasim and the L&T management on splitting the cement division.

“Issues have changed a lot since the initial open offer was made by Grasim. The two entities have now moved on to a different turf,” a Mumbai-based analyst said.

At the moment, the debate is riveted on a two-way division —cement and everything else. Senior officials of the AV Birla group declined comment, saying they would wait for the formal Sebi letter to arrive before reacting.

Adding to all the suspense is Investors Grievance Forum (IGF), an organisation that has sniffed the stench of foul-play in the way Birlas bought out the Ambanis from L&T in the autumn of 2001.

On Friday, a day after the market regulator cast the dye in favour of Grasim, it preferred to keep the cards close to its chest. But, sources say, it could contest the Sebi decision in the Securities Appellate Tribunal in the days ahead.

Another big factor would be financial institutions, the largest group of shareholders in L&T. There have been signs in the recent past that they will not sell to the Birlas if the initial offer is not sweetened. However, they appear to be amenable to the idea of spinning off the cement business as they see gains in it.

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