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: The Company was incorporated on 15th April, at Hyderabad. The Company was
promoted by Andhra Pradesh Industrial Development Corporation Ltd. (APIDC), in the jointly
with N.K.P. Raju

 11, 12,000 shares were taken up by promoters, directors etc.11 , 57,000 shares
allotted to APIDC. 25,000 preference shares and 21, 80,500 equity shares offered at par to
public in December.

: The Company acquired limestone mining lease over area of 2,133.36 acres in
Wadapalli, Irukagunda and Kothapalli villages.

: Expansion scheme by installation of ropeway across river Krishna and certain energy
saving equipments.

: Raasi Ceramic Industry Limited became a subsidiary of the company. RCIL is engaged
in production and sales of sanity ware

: The Indian Cements Group acquired the controlling interest in the company.


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The India Cements Ltd was established in 1946 and the first plant was setup at Sankarnagar
in Tamilnadu in 1949 . Since then it has grown in stature to seven plants spread over
Tamilnadu and Andhra Pradesh . The capacities as on March 2002 have increased multifold
to 9 million tons per annum.

The Company is the largest producer of cement in South India.

Company's plants are well spread with three in Tamilnadu and four in Andhra Pradesh
which cater to all major markets in South India and Maharashtra.

The Company is the market leader with a market share of 28% in the South. It aims to
achieve a 35% market share in the near future. The Company has access to huge limestone
resources and plans to expand capacity by de-bottlenecking and optimisation of existing
plants as well as by acquisitions.

It has a strong distribution network with over 10,000 stockists of whom 25% are dedicated.

The Company has well established brands - Sankar Super Power, Coromandel Super Power
and Raasi Super Power.Regional offices in all southern states and Maharasthra
offices/representative in every district.
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We should be one of the largest Cement Companies in the Country. Our growth in size will
be through continuous review of potentials of the existing manufacturing resources,
strategic acquisitions and expansions 

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Cement will be our mainstay. However, we shall venture into related fields which afford
purposeful synergy.

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ICL will continuously strive to enhance its value to its customers, shareholders and
Employees.

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As the organization grows, as a good Corporate Citizen, we shall be sensitive to the welfare
and development needs of the Society around us.


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V Acquisition of or merger with an existing concern is an instant means of achieving

the expansion.

V Apart from the urge to grow, acquisitions and mergers are resorted to for purposes
of achieving a measure of synergy between the parent and the acquired ente rprises.

V Synergy may result from such bases as physical facilities, technical and managerial
skills, distribution channels, general administration, research and development and
so on.

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V When India cements was passing through difficult tim es, in 1987-89 ,the then IDBI
chairman S.S.Nadkarni had requested Mr.Raju to takeover the ailing company. But
he had refused saying,͟ One should not close in on a weak colleague͟.

V It all started when Raasi, suspecting the possibility of takeover from one o f India͛s
big corporate houses, Kotak Mahindra, sought the help of ICL . ICL started
accumulating Raasi shares from the market , and it was too late when Mr.Raju
realised that ICL was in possession of larger number of shares than it was told to
accumulate .ICL had already acquired about 9 percent stake in Raasi cements.


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The takeover was driven primarily by the expectations of the benefits arising out of the
close coordination between the two companies :

V The acquisition would give ICL an additional market share of approximately 22-25
percent in Andhra Pradesh.
V ICL would have access to limestone reserves, a major raw material for cement.
V The existing distribution infrastructure of Raasi would help ICL to reduce the freight
and other costs, and would help avoid duplication of several other functions.
V Access to some of the cement deficit regions of Tamil Nadu and Kerala could help ICL
to strengthen its position in southern market.
V ICL could gain access to established brands like c
.
V Raasi was a relatively low-cost producer because it possessed limestone reserves.
V The takeover of Raasi would also help in rationalisation of various markets between
ICL and Raasi, and interchangeable use of Sankar, Coromandel and Raasi brand
names.

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´ The takeover battle started with ICL already holding a 9 percent stake in Raasi
cements.

´ By January 1998, ICL gradually increased its stake in Raasi from 9 percent to a little
over 18 percent with the help of the dissidents belongin g to Raju͛s family.

´ In February 1998, Srinivasan announced an open offer to acquire an additional 20%

of Raasi's equity.

´ He offered Rs 300 per share, 72.41% above the stockmarket price of Rs 174 on
February 26, 1998. Raasi's shareholders seemed to find it hard to turn down his
offer.

´ On March 1, 1998, the state-owned APIDC sold its 2.13% stake in Raasi to ICL.
Subsequently, a Chennai -based stockbroker, Valampuri & Co., cornered 1.40 % of
Raasi's equity from the market for Srinivasan, taking ICL's stake in Raasi to 21.56%.
And it further increased to 28.56% with V.P. Babaria, a transporter for both ICL and
Raasi, selling off his 7% stake in Raasi.


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V Raju also had the option of making a counter -offer to his shareholders, and weaning
away potential sellers from Srinivasan. But this was an expensive option, (Raju
needed approximately Rs 100 crore to make a counter bid) and he did not seem to
have the funds to pull it off.

V In March 1998, realizing his predicament, Raju began to negotiate with Srinivasan to
sell his 33% shares in the company.

V The battle of takeover saw India Cements end up paying a price that was around 60
percent above the then ruling market price of Raasi͛s shares.

V However, this cost, according to some estimates was much lower when compared to
the cost required for setting up a greenfield plant.

V The Rs 380-crore deal was one of the biggest ever acquisitions in Indian corporate
history, and the first successful hostile takeover.

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Poison pills:

V Poison pills are any type of defensive maneouvre which a company might try in
order to protect itself against unwanted takeover bids, eg stock issues, special
distributions, spin -offs and management pay-outs.

V A corporate provision to combat hostile takeovers. The poison pill

allows shareholders to acquire additional shares at below market price, thereby
increasing the number of shares outstanding and making the takeover prohibitively
expensive.


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V Shri Vishnu Cement Limited (SVCL ) ,a subsidiary of RCL was transferred by Raju to 9
of his associates barely few days after the purchase by ICL.

V This was in violation of Regulation 23(1)(g) of the takeover code, which prohibits a
target company from transferring its significant assets after a public announcement
has been made by an acquirer to make an open offer for purchase of shares from the
public.

V Retaining SVCL was of strategic importance for both ICL and Raju. Having lost control
of Raasi, Raju had no other foundation to build his empire on. On the other hand, ICL
could further consolidate its presence in South India if it could control SVCL.

V The use of Poisson pill stretched the acquisition price too far thereby diluting the
advantages of ICL .

V In October 1999 Raju sold his disp uted 39.5% stake in SVCL to ICL in an out -of-court
compromise settlement for Rs 1.15 billion. By the end of 2000, SVCL became a
subsidiary of ICL.


 
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V ICL succeeded in bringing down the power & fuel costs, which ranged from34 -37
percent to 28-29 percent.

V Advertising and marketing costs declined by more than 50 percent, from Rs.7.45
crores in FY 1997-98 to Rs.3.60 crores in FY 1998 -99.

V The company embarked on a major technological up-gradation drive as well as

capacity expansion.

V As a result of these post-merger measures, the company scaled up its capacity to ten
million tons.

V Furthermore, it successfully stepped up its sales in Tamil Nadu and Kerala , achieving
market share of 32 percent and 29 percent respectively.
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V Debt raising ability of combined firm can be greater than the sum of the 2 firm͛s
ability before the merger.

V Substantial tax savings in investment income

V Economies of scale in flotation and transaction cost of securities.

V In a major drive to bring down the co st of debt and improve leverage, ICL intiated
several measures after merger.

V Along with Raasi, came its loss making paper and ceramics divisions.

V But ICL sold off the subsidiaries of Raasi and merged the cement division of the
company with itself wef April 1st 1998.

V But the burden of acquisition financing was very high.

V Increase of debt has lead to increase in the cost of debt.

Lack of realisation of financial synergy is evident from the PAT figures that has
reduced from 8%-4% in 2001.
 




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The basic premise of operating synergy is that economies of scale arise due to
indivisibilities such as people and equipment which provide increased returns.

V During FY 1998-99 the combined cement capacity of ICL increased upto 8mn tpa.
V The company was able to reduce the cost through freight rationalisations, lower
power and fuel consumption and by efficiently utilising its existing resources.
V As a result of efficient energy management , it was able to reduce the per ton
power consumption from 114 units to 97 units.
V The combine͛s efforts to cut down employee costs resulted in reduction in
manpower by 1012 employees during the year under Voluntary Retirement
Scheme (VRS).
V Concerted efforts on brand building and value addition helped it achi eve greater
penetration in some parts of southern region.
V Its market share in the entire region increased from 15 percent in 1997 -98 to 25-
26 percent in 1998 -99.However, this was much below the pre -merger
expectations of 30-35 percent.

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V While the sales and margins have not improved to a desired level, the cost-cutting
measures have already started yielding results.

V But the performance of combined company in the face of tough market conditions is
not totally disappointing.

V It would be hasty to conclude that the merger has brought desired results.

V Synergies expected in the areas of sales expenses and material costs.

V Neither distribution nor material cost synergies were realized.