Mumbai, Oct. 14: Chances of Grasim Industries’ open offer for Larsen & Toubro (L&T) turning successful receded today when investors, big and small, fretted that the deal being dished out was not good enough.
Financial institutions (FIs), which own a sizeable 38 per cent slice of the conglomerate, are not impressed by a price of Rs 190, saying it compares poorly with the Rs 306.50 that Grasim forked out for the Reliance group’s 10.5 per cent stake in November 2001.
Together, Life Insurance Corporation, Unit Trust of India and General Insurance Corporation have not arrived at a common stand, but sources say their unhappiness with the offer price is not a secret any more. “The price looks very low and we will have to think about participation,” LIC chief S. B. Mathur, whose company holds over 17 per cent stake in L&T, said. “Our nominees will bring this to the notice of the Birlas.”
Hopes that the Birlas would realise this and sweeten their bait sent the L&T stock surging by over 5 per cent today. Opening at Rs 179 on Dalal Street, the scrip hit an intra-day high of Rs 181.65 before ending at Rs 181, up Rs 8.95 over the last close. “If the Birlas are serious, they will raise the price from Rs 190,” a broker said.
An A. V. Birla group official refused comment on a possible rise in the offer price, but said the company was confident of getting a good response from retail investors.
That optimism is not shared by a large a section of the market, which feels Kumar Mangalam Birla is unlikely to garner too many shares unless he pays more. “They might mop up between 8-10 per cent shares of L&T, following which the group could turn to creeping acquisitions to raise their stake,” an analyst said.
Retail investors who fear they will be the biggest losers in the deal might not play ball either. “There were hopes that the cement unit of L&T would be de-merged and a foreign player would be roped in to run it. This did not happen, depressing the L&T stock. Now, we have a disappointing offer price,” an investor carped.
In the long run, many say the Birlas will merge L&T’s cement wing with Grasim. There are reports suggesting the group could sell its stake in cellular company Idea to raise money for the plans.