Introduction

• IC L
• Indian Cement Ltd., was one of the largest cement producers in south
India. Established in 1946 in Tamilnadu.
• N.srinivasan – vice chairman of ICL
• Raasi
• Raasi cement promoted by B.V.Raju and N P K Raju in 1978.
• Main Industry is located in Hyderabad.
• Other than cement, the group also had interests in ceramics and paper
• B.V.Raju – vice chairman of Raasi cement.
Why did ICL get in ?
• the acquisition would give !CL an additional market share of approximately
22-25 percent in Andhra Pradesh.

• access to
some of the cement deficit regions of Tamil Nad u and
Kerala could help ICL fur ther consolidate its position
in the southern markets.

• ICL would have access to limestone reserves, a major raw

material for cement.
Added to that, the existing
rdistribution inf astructure of Raasi would help !CL to
rleverage this to reduce the feight, and other costs. and
would help avoid duplication of several other functions.
Last but not the least, access to established brands like
Raasi Gold.
The Takeover Drama
• 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 belonging to Raju 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.
Poison Pill
• SVCL (sri vishnu cement limited ) which was the subsidiary of RCL was transferred
by Raju to nine of his associates after the purchase by ICL of Raju’s shares in RCL.
This was violation of 23 of takeover code which prohibits the target company
from transferring its assets after a public announcement has been made by the
acquirer to make open offers for purchase of shares from public.
• The use of Poisson pill stretched the acquisition price too far thereby diluting the
advantages of ICL .

• In October 1999 Raju sold his disputed 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.
Post-Merger results
• ICL succeeded in bringing down the power & fuel costs, which ranged
from34-37 percent to 28-29 percent.
• 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.
• The company embarked on a major technological up-gradation drive
as well as capacity expansion.
• As a result of these post-merger measures, the company scaled up its
capacity to ten million tons.
• Furthermore, it successfully stepped up its sales in Tamil Nadu and
Kerala , achieving market share of 32 percent and 29 percent
respectively.
FINANCIAL SYNERGY
• Debt raising ability of combined firm can be greater than the sum of
the 2 firm’s ability before the merger.
• Substantial tax savings in investment income
• In a major drive to bring down the cost of debt and improve leverage,
ICL intiated several measures after merger.
• Along with Raasi, came its loss making paper and ceramics divisions.
But ICL sold off the subsidiaries of Raasi and merged the cement
division of the company with itself wef April 1st 1998.
OPERATING SYNERGY
 The company was able to reduce the cost through freight
rationalisations, lower power and fuel consumption and by
efficiently utilising its existing resources.
 As a result of efficient energy management , it was able to reduce
the per ton power consumption from 114 units to 97 units.
• The combine’s efforts to cut down employee costs resulted in
reduction in manpower by 1012 employees during the year under
Voluntary Retirement Scheme (VRS).
Conclusion
• While the sales and margins have not improved to a desired level, the
cost-cutting measures have already started yielding results.
• But the performance of combined company in the face of tough
market conditions is not totally disappointing.
• It would be hasty to conclude that the merger has brought desired
results.
• Synergies expected in the areas of sales expenses and material costs.
• Neither distribution nor material cost synergies were realized.