L&T RESTRUCTURING CEMENT

BUSINESS
ZARA KHAN
16DM258
PGDM
FINANCE F2
• India is the second largest cement producer in the world
• It is a highly capital intensive business with a very high
operating leverage
• Grasim is a part of Aditya Birla group formed in 1948
• Grasim started as textile business
• Larsen and Turbo Ltd is the country largest engineering and
construction conglomerate.
• Grasim wanted to acquire L&T cement business with the
motive of growing through acquisition.
• Grasim was strong in southern market while L&T was strong
in rest of India. Grasim was interested in L&T robust
distribution system.
• Grasim acquired 10% of the L&T shares through Reliance (at
47% higher than the market price) which has acquired the
share just few days before.
• Grasim made a public announcement to acquire 20% stake
of L&T at Rs190 per share on 14 Oct 2002.
• In-order to avoid take over Grasim, told its shareholders not to
sale the shares as the intrinsic value of the share is more than
Rs190 per share.
• On November 8, 2002 SEBI instructed not to proceed with the
deal to do a through investigation and on 2003 given a clean
chit to Grasim.
• In June 2003, L&T and Grasim decided to de-merge L&T
cement business so that Grasim acquire only the cement
business of L&T and have no stake in other business.