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ULTRA TECH CEMENT

L&T

ULTRA TECH CEMENT L&T BY AND ITS ACQUISITION BY GRASIM PG- PG- Durvangi Vaity 04 07

BY

AND ITS

ACQUISITION BY GRASIM

ULTRA TECH CEMENT L&T BY AND ITS ACQUISITION BY GRASIM PG- PG- Durvangi Vaity 04 07
PG- PG-
PG-
PG-

Durvangi Vaity

04

07
07

Shweta Raut

1
1
ULTRA TECH CEMENT L&T BY AND ITS ACQUISITION BY GRASIM PG- PG- Durvangi Vaity 04 07

GRASIM WAS BADLY AFTER L&T

WHY?

GRASIM WAS BADLY AFTER L&T WHY?
GRASIM WAS BADLY AFTER L&T WHY?
GRASIM WAS BADLY AFTER L&T WHY?
GRASIM WAS BADLY AFTER L&T WHY?
GRASIM WAS BADLY AFTER L&T WHY?
GRASIM WAS BADLY AFTER L&T WHY?
GRASIM WAS BADLY AFTER L&T WHY?
ANSWER As on 31 st march, 2003 cement capacity: in million tonnes 1. In India 135
ANSWER
As on 31 st march, 2003 cement capacity:
in million tonnes
1.
In India
135
2.
L&T
18
(13.3%)
3.
ACC ltd.
15
(11.1%)
4.
Grasim
13
(9.6% )
5.
Gujrat Ambuja
12.5
(9.3%)
43.3%

Grasim wanted to acquire L&T. Its root cause is in another story.

1.

L&T’s 10.05% stake was with was ready to sell.

RIL.

RIL

RIL acquired it in late 1980’s

L&T fitted very well in RIL’s plan to set up mega projects one after another.

Grasim wanted to acquire L&T. Its root cause is in another story. 1. L&T’s 10.05% stake
Grasim wanted to acquire L&T. Its root cause is in another story. 1. L&T’s 10.05% stake
Grasim wanted to acquire L&T. Its root cause is in another story. 1. L&T’s 10.05% stake
Grasim wanted to acquire L&T. Its root cause is in another story. 1. L&T’s 10.05% stake
2. 3.
2.
3.
Grasim wanted to acquire L&T. Its root cause is in another story. 1. L&T’s 10.05% stake
Grasim wanted to acquire L&T. Its root cause is in another story. 1. L&T’s 10.05% stake

Why RIL wanted to sell?

RIL could

not manage to

get support

from the govt., public at large or FI’s.

Largest shareholders of L&T

FI’s LIC and UTI

40%

27%

Why RIL wanted to sell?  RIL could not manage to get support from the govt.,
Why RIL wanted to sell?  RIL could not manage to get support from the govt.,
Why RIL wanted to sell?  RIL could not manage to get support from the govt.,
Why RIL wanted to sell?  RIL could not manage to get support from the govt.,
Why RIL wanted to sell?  RIL could not manage to get support from the govt.,
Why RIL wanted to sell?  RIL could not manage to get support from the govt.,
Why RIL wanted to sell?  RIL could not manage to get support from the govt.,

The main story

The main story STEP 1: Acquired 10.05% stake from RIL. STEP 2: Acquired 4.48% stake through
The main story STEP 1: Acquired 10.05% stake from RIL. STEP 2: Acquired 4.48% stake through

STEP 1: Acquired 10.05% stake from RIL. STEP 2: Acquired 4.48% stake through subsidiar STEP 3: Open offer after more than 6 months. STEP 4: Delay in open offer. STEP 5: Proposal by L&T STEP 6: Counter proposal by Grasim STEP 7: SEBI’s approval. STEP 8: Structured demerger deal

The main story STEP 1: Acquired 10.05% stake from RIL. STEP 2: Acquired 4.48% stake through
The main story STEP 1: Acquired 10.05% stake from RIL. STEP 2: Acquired 4.48% stake through
The main story STEP 1: Acquired 10.05% stake from RIL. STEP 2: Acquired 4.48% stake through
The main story STEP 1: Acquired 10.05% stake from RIL. STEP 2: Acquired 4.48% stake through
The main story STEP 1: Acquired 10.05% stake from RIL. STEP 2: Acquired 4.48% stake through

Structured Demerger Deal

Structured Demerger Deal STEP 1: Formation of ULTRA TECH Cement Ltd. STEP 2: Effect on L&T’s
Structured Demerger Deal STEP 1: Formation of ULTRA TECH Cement Ltd. STEP 2: Effect on L&T’s

STEP 1: Formation of ULTRA TECH Cement Ltd. STEP 2: Effect on L&T’s equity & paid-up capital. STEP 3: UltraTech’s paid-up capital. STEP 4: Share of L&T in Ultra Tech. STEP 5: Share of Grasim in Ultra Tech. STEP 6: Open offer for 30% stake by Grasim. STEP 7: Doubling of price for 8.5% + 30% stake STEP 8: Liquidation of 11.5% stake of L&T. STEP 9: Selling of pre-demerger stake of Grasim

Structured Demerger Deal STEP 1: Formation of ULTRA TECH Cement Ltd. STEP 2: Effect on L&T’s
Structured Demerger Deal STEP 1: Formation of ULTRA TECH Cement Ltd. STEP 2: Effect on L&T’s
Structured Demerger Deal STEP 1: Formation of ULTRA TECH Cement Ltd. STEP 2: Effect on L&T’s
Structured Demerger Deal STEP 1: Formation of ULTRA TECH Cement Ltd. STEP 2: Effect on L&T’s
Structured Demerger Deal STEP 1: Formation of ULTRA TECH Cement Ltd. STEP 2: Effect on L&T’s

Q:-Smart Negotiation by L&T

1.

2.

3.

4.

5.

6.

Sold 8.5% stake at very high price.

Made Birlas sell their 14.95% stake to employees welfare trust.

Strengthen L&T’s Balance Sheet

Transfer of debts to Ultra Tech.

Debt to Equity ratio improved.

Selling of 11.5% stake in small trenches.

Q:-Smart Negotiation by L&T 1. 2. 3. 4. 5. 6. Sold 8.5% stake at very high
Q:-Smart Negotiation by L&T 1. 2. 3. 4. 5. 6. Sold 8.5% stake at very high
Q:-Smart Negotiation by L&T 1. 2. 3. 4. 5. 6. Sold 8.5% stake at very high
Q:-Smart Negotiation by L&T 1. 2. 3. 4. 5. 6. Sold 8.5% stake at very high
Q:-Smart Negotiation by L&T 1. 2. 3. 4. 5. 6. Sold 8.5% stake at very high
Q:-Smart Negotiation by L&T 1. 2. 3. 4. 5. 6. Sold 8.5% stake at very high
Q:-Smart Negotiation by L&T 1. 2. 3. 4. 5. 6. Sold 8.5% stake at very high

Q:- Takeover strategies of Grasim

Str1. Bought 10.05% stake from RIL Str2. Acquired 4.48% through subsidiary

Str3. Made open offer after more than 6 months

Str4. Appeal to SAT Str5. Took stay on L&T’s proposal Str6. Counter Proposal of Vertical Demerger Str7. Creeping acquisition Str8. Convinced FI’s

Q:- Takeover strategies of Grasim Str1. Bought 10.05% stake from RIL Str2. Acquired 4.48% through subsidiary
Q:- Takeover strategies of Grasim Str1. Bought 10.05% stake from RIL Str2. Acquired 4.48% through subsidiary
Q:- Takeover strategies of Grasim Str1. Bought 10.05% stake from RIL Str2. Acquired 4.48% through subsidiary
Q:- Takeover strategies of Grasim Str1. Bought 10.05% stake from RIL Str2. Acquired 4.48% through subsidiary
Q:- Takeover strategies of Grasim Str1. Bought 10.05% stake from RIL Str2. Acquired 4.48% through subsidiary
Q:- Takeover strategies of Grasim Str1. Bought 10.05% stake from RIL Str2. Acquired 4.48% through subsidiary
Q:- Takeover strategies of Grasim Str1. Bought 10.05% stake from RIL Str2. Acquired 4.48% through subsidiary

Q:-Defensive Strategies of L&T

Str1. Proposal of demerger of cement business into subsidiary. Str2. Consent for the structured deal Str3. Surrendered for survival. Str4. Good negotiation in the deal.

Q:-Defensive Strategies of L&T  Str1. Proposal of demerger of cement business into subsidiary.  Str2.
Q:-Defensive Strategies of L&T  Str1. Proposal of demerger of cement business into subsidiary.  Str2.
Q:-Defensive Strategies of L&T  Str1. Proposal of demerger of cement business into subsidiary.  Str2.
Q:-Defensive Strategies of L&T  Str1. Proposal of demerger of cement business into subsidiary.  Str2.
Q:-Defensive Strategies of L&T  Str1. Proposal of demerger of cement business into subsidiary.  Str2.
Q:-Defensive Strategies of L&T  Str1. Proposal of demerger of cement business into subsidiary.  Str2.
Q:-Defensive Strategies of L&T  Str1. Proposal of demerger of cement business into subsidiary.  Str2.

Q:- Real Winners?

Real winners are the Birlas.

1.

2.

After acquisition capacity of Grasim and UltraTech went up to 31 million tonnes.

Grasim became India’s largest producer and the 8 th largest in the world.

L&T was a premium brand and used to fetch higher prices. Grasim was allowed

to use the brand for 1 year. Within this

period, Grasim managed

to

transfer

brand equity of ‘L&T Cement’ to ‘Ultra

Q:- Real Winners? Real winners are the Birlas. 1. 2. After acquisition capacity of Grasim and

Tech Cement’.

Q:- Real Winners? Real winners are the Birlas. 1. 2. After acquisition capacity of Grasim and
Q:- Real Winners? Real winners are the Birlas. 1. 2. After acquisition capacity of Grasim and
Q:- Real Winners? Real winners are the Birlas. 1. 2. After acquisition capacity of Grasim and
3.
3.
Q:- Real Winners? Real winners are the Birlas. 1. 2. After acquisition capacity of Grasim and
Q:- Real Winners? Real winners are the Birlas. 1. 2. After acquisition capacity of Grasim and

4.

5.

While Grasim was strong in southern markets, L&T was strong in rest of India.

L&T’s strong distribution network was

very vital brand also.

to

Grasim to

push

its

own

6.

The B/S shows that cement division had incurred losses in 2002-03. Yet Grasim acquired it. This is because Birla’s were aware that in next 4-5 years cement business would turn highly profitable.

4. 5. While Grasim was strong in southern markets, L&T was strong in rest of India.
4. 5. While Grasim was strong in southern markets, L&T was strong in rest of India.
4. 5. While Grasim was strong in southern markets, L&T was strong in rest of India.
4. 5. While Grasim was strong in southern markets, L&T was strong in rest of India.
4. 5. While Grasim was strong in southern markets, L&T was strong in rest of India.
4. 5. While Grasim was strong in southern markets, L&T was strong in rest of India.
4. 5. While Grasim was strong in southern markets, L&T was strong in rest of India.
Financial = PBT performance Sales L&T L&T Ultra Ultra Tech Tech 2003- 2007- 2003- 2007- 04
Financial
=
PBT
performance
Sales
L&T
L&T
Ultra
Ultra
Tech
Tech
2003-
2007-
2003-
2007-
04
08
04
08
12.53% 1.8%
Increase in profits from 2003- 04 to 2007-08 L&T 307.96% Ultra Tech 2494.92%
Increase in profits from 2003-
04 to 2007-08
L&T
307.96%
Ultra Tech
2494.92%

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