The Telegraph
Since 1st March, 1999
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Shadow boxers in L&T bout

Mumbai, Oct. 22: A cloak-and-dagger intrigue is being played out in the Larsen & Toubro share, probably to scuttle the open offer made by the A.V. Birla group.

Financial institutions, led by Life Insurance Corporation (LIC), are believed to be mopping up L&T shares, along with a clique of brokers close to a corporate group. Market watchers say if the trend persists, it may upset the Birlas, who have been counting on a small section of shareholders to bite their bait.

“This, together with open market purchases, could increase the group’s present stake of around 15 per cent in Larsen & Toubro to 20 per cent,” corporate observers say.

The open offer announced through Grasim Industries would have served its purpose even if it soaks up 5 per cent of the equity from investors. That would give the Birlas an unassailable lead against other suitors.

What has sent their calculations awry over the past few days is that LIC has played ball with those scooping up shares and driving up L&T’s price close to the offer. “This has thrown a spanner in the works as the Birlas did not expect a financial institution to act in the way the insurer has,” a broker affiliated to an institution said.

FIs have made it plain that the deal offered by Grasim is not good enough for them to part with their holdings in a company for which the Birlas had paid Rs 306 a share when they bought out the Ambanis last year.

“Buy orders were placed for L&T shares by the insurance major at levels close to the offer price of Rs 190. However, the quantities bought have been small,” sources said.

The L&T stock shot past the Rs 190-mark last week. Today, it nudged that threshold again before closing at Rs 185.95 on Dalal Street. Many in the market say institutions are working to make the open offer price unattractive for small investors.

FIs appear to agree that L&T cannot be served on a platter to a group that forked out Rs 306 a share to Reliance, but is willing to pay them only a fraction of that price.

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