The Telegraph
Since 1st March, 1999
Email This PagePrint This Page
Demerger plan in tune with law, says L&T

Mumbai, Dec. 12: Larsen & Toubro (L&T) today said a de-merger of its cement division would generate significant value-creation for shareholders even as it is aware of all legal nuances that have a bearing on the plan.

The company told exchanges about this today, but sources say the tenor of the letter suggests that the board would not shy away from discussing the proposal.

The conglomerate said the long-planned recast of the division would reach a decisive stage once a suitable investor who will invest in the spun-off entity, is spotted. “L&T has been in talks with several financial investors since September 2001 to secure capital for the growth of the cement business. Grasim’s stake acquisition made many of them pause to assess the impact of the development. Talks resumed in July 2002,” the company has said in its letter.

A possible investment by CDC Capital Partners, a proposition high on its priority-list, was the outcome of discussions with CDC’s private equity arm since July.

“L&T is fully aware of the legal issues and has been dealing with reputable private equity investors (including CDC) who are also aware of them. Both L&T and CDC believe the demerger of the cement business and subsequent capital infusion into the demerged entity will result in significant value creation for L&T’s shareholders,” the company’s letter states.

The submission follows a legal notice that Grasim sent in an attempt to prevent discussion on the spin-off at L&T’s December 7 board meeting. It had warned of a ‘serious dispute and possibility of long-drawn litigation’ if its call went unheeded. A decision to hold another meeting on the issue early next week will be taken soon.

“The company is likely to hold a board meeting this month to discuss the demerger issue,” an official said, adding L&T’s solicitors have sent their reply to Grasim’s notice.

Email This PagePrint This Page