The Telegraph
Since 1st March, 1999
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Stalked L&T ready to chase Engineers India

Mumbai, Nov. 8: The prey turns hunter. Before stalker Grasim cools its heels, Larsen & Toubro (L&T) has set off on a chase that could give it control of Engineers India Limited (EIL), a PSU headed for divestment.

The diversified company is thinking how it can deal with Birlas’ open offer, but that preoccupation has not stopped it from considering a bid for the state-owned company.

The company might decide to hold an extra-ordinary general meeting of its shareholders to get their approval to join the race for Engineers India Limited. More important, investors might be asked to approve the quest in the time Grasim’s offer remains open.

The feeling is that timing the meeting that way will give shareholders a chance to voice their opinion on the open offer — slammed by several small investors’ associations as paltry. It will bring differences between financial institutions (FIs) and Grasim into sharp focus after the Birlas offered to buy L&T shares at Rs 190 apiece.

All this will happen at a time when Securities and Exchange Board of India (Sebi) has promised an early end to investigations into the Reliance-Grasim deal. The Birlas acquired shares from the Ambanis at Rs 306.60 — a sharp mark-up on the market price — in November 2001.

For now, the L&T top-brass remains guarded on how it will respond to the offer. Some believe it would take a position on the matter at a meeting of shareholders.

Merchant bankers are of the opinion that a bid for EIL will bring financial institutions and the Aditya Birla group on the same side. They say that there is a lot of synergy to be reaped if the PSU comes to the fold.

L&T, which has interests in engineering, construction and cement, lacks the attributes that Engineers India boasts of in designing, construction of chemical and petrochemical plants that involve process engineering.

Sources say getting shareholders’ clearance to pursue EIL will be a cakewalk when Grasim and the financial institutions think alike on the issue and vote for it.

The imponderable would be L&T’s share price. A conglomerate turning the corner should ideally see its shares looking up.

There is evidence it is already happening. The stock has shot past the critical threshold of Rs 190, testing an intra-day high of Rs 197.30 on Dalal Street today before closing at Rs 195.45. That was a gain of Rs 6.15 from Thursday’s finish of Rs 191.15.

According to merchant bankers, the disinvestment of state-run companies like Balmer Lawrie and Engineers India are expected to go through since the government realises it must show the world a semblance of credibility in its zeal to press ahead with reforms.

All the same, L&T’s bid for EIL will provide a twist and a delicious irony of the stalked turning into a stalker.

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