The Telegraph
Since 1st March, 1999
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Grasim asked not to hike L&T stake

Mumbai, Nov. 29: The Securities and Exchange Board of India (Sebi) today asked Grasim Industries Ltd not to make any additional purchases in Larsen & Toubro (L&T), following yesterdayís order by the Securities Appellate Tribunal (SAT) upholding the stay on Grasimís open offer for 20 per cent in L&T imposed by the regulator.

A communication to this effect was issued today by the regulator to JM Morgan Stanleyómerchant bankers of Grasim Industriesóadvising them that Grasim should not hike its stake in L&T either through the open market or negotiations or otherwise, with effect from November 29 until further orders..

Confirming the move, Sebi chairman G. N. Bajpai said Grasim could not hike its L&T stake following SATís rejection of its plea for interim relief. Speaking to newspersons after Sebiís board meeting, Bajpai said since SAT has upheld its advice on the open offer, Grasim could not use the creeping acquisition or any other route to buy additional shares of L&T.

Analysts however, said the Sebi directive was on expected lines.

The regulator may also ask Grasim to divest its stake in excess of 15 per cent in L&T, bought after announcement of open offer.

Grasim today told the exchanges that SAT, in its order passed on November 28, declined to grant interim relief staying Sebiís November 8 order not to proceed with the open offer for L&T, on the grounds that there was no urgency to do so pending the completion of Sebiís investigation into whether Grasimís acquisition of Relianceís stake in L&T had given it management control over the latter. The main appeal on merits is still to be heard by SAT, the company added.

Sebi had told the tribunal that it was re-examining the entire transaction between Reliance Industries and Grasim Industries that saw 10 per cent of L&T change hands, and that if Grasim was found guilty after the investigations, the company could even be barred from accessing the capital markets.

The tribunalís ruling would effectively mean that Grasimís open offer for shareholders of L&T at Rs 190 per share would be delayed. The order today affected the Grasim scrip, which dipped by over 2 per cent or Rs 5.75 to close at Rs 286.70 on fears that it may have to raise its open offer price for L&T.

Grasim had bought 10.05 per cent from Reliance Industries Ltd in November last year at Rs 306 per share and later raised its stake to a little over 14 per cent in tranches. Later, it made an open offer for Rs 190 per share and continued its purchases through its subsidiary Samruddhi Investments Ltd, taking its holding beyond 15 per cent.

Meanwhile, a spokesman of JM Morgan Stanley, the manager to the open offer, said it had sent its response to Sebi regarding its delay in communicating the regulatorís order staying the open offer, to the bourses.

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