Mumbai, Dec. 2: As the battle over its open offer for L&T rages on, attaining the magic 26 per cent mark will be crucial for the A V Birla group if it wants to have any say in the proposed demerger of L&T’s cement division.
This, however, hinges on investigations carried out by the Securities and Exchange Board of India (Sebi). The market regulator is currently probing alleged violations regarding the acquisition of 2.50 crore equity shares aggregating 10.5 per cent of the equity capital of L&T by Grasim Industries and whether the Birlas have management control over L&T.
Moreover, Sebi had asked Grasim not to proceed with its open offer for a 20 per cent stake in L&T and not make any additional purchases of the company’s shares from the market till its investigations were over.
Sebi has already pointed out that if Grasim was found guilty in the deal with Reliance, it could even be barred from accessing the capital markets. The market watchdog is also empowered to direct companies to make a public offer at a particular price.
Observers point out that while much would depend on the outcome of the investigations, if the group were to be absolved by the regulator one of its priorities would be to reach the 26 per cent level. This limit is crucial as it could give the group powers to block resolutions in an EGM. The group currently has a little over 15 per cent in L&T.
This, they said, can be done either by hiking the open offer price or resorting to aggressive purchases from the market to reach 26 per cent. “The group may not be displeased even if the regulator were to ask it to make an open offer at an higher price,” an analyst noted.
Observers say the L&T management has played a masterstroke by speeding up the cement demerger plan amid indications that the financial institutions, which hold 40 per cent in L&T, are not opposed to the idea.
The Birla group has maintained that they have not exercised any form of control over L&T and, that till date, no change has been effected in the latter’s management at its behest. Further, it stated that its two directors are not even on any committee of directors of the L&T board.