• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Our Bureau

The increase in stake notwithstanding, board representation stands unchanged, a spokesperson said.

MUMBAI, May 31

IN a bid to augment its equity stake and bring down the average cost of holding, Grasim Industries Ltd has acquired another 2.84 per cent stake in Larsen & Toubro Ltd (L&T) through open market purchases, taking its stake to 12.89 per cent.

According to Mr D.D. Rathi, Group Executive President & CFO, Grasim, the shares were purchased at prices ranging from Rs 175-180 over the past few weeks.

"The reason we wanted to increase our holding was to augment our stake and bring down the average cost of our investment," he said.

In November 2001, Grasim had acquired 10.05 per cent stake in L&T from Reliance Industries Ltd at a price of Rs 306.60 per share. The total cost of the acquisition was Rs 766.50 crore.

Subsequently, Mr Kumar Mangalam Birla, Chairman, A. V. Birla Group, and Ms Rajashri Birla, Director, A. V. Birla Group, were appointed to the board of L&T. The current increase in stake notwithstanding, board representation stands unchanged, a group spokesperson said.

The open market purchase of L&T shares was funded from Grasim's internal accruals. "Our investment in L&T continues to be a strategic one," the spokesperson said, ruling out an open offer at this juncture.

"There is no mystery in the 2.84 per cent figure. We have been buying shares over a period of time. Law mandates that we inform the company within four days of acquiring two per cent stake," Mr. Rathi said. He declined comment when asked if the intent was to acquire shares to below the 15 per cent stake-mark.

"That is a speculative question," Mr Rathi said.

As per rules, a company can acquire up to 15 per cent stake through open market purchases without making an open offer.

This includes the creeping acquisition limit of ten per cent per annum.Mr Rathi said the current holding of 12.89 per cent equity stake will not alter Grasim's position vis-a-vis L&T.

When contacted, analysts said the stake increase was expected.

"The L&T share price had fallen in the past few weeks in the absence of any positive news. For Grasim, this was an opportune time to increase its stake in L&T through creeping acquisition route," Mr Rahul Dhawan, Head of Research, SKP Securities, said.

"Grasim is a cash rich company. With no major expansion plans, its investments would go into consolidating its position at L&T," he said.

At the time of initial investment, there were indications in the market that the A.V. Birla group would gradually increase its holding in L&T, an engineering and cement conglomerate.

While L&T's cement business was the reason for the original investment, Grasim had indicated it was interested in L&T's knowledge-based business - its engineering and construction activity as well.

The share price of Grasim today ended Rs 3 down at Rs 294 on the BSE. On the NSE, it moved down by Rs 3.45 to Rs 294.20.

Shares of L&T slipped to Rs 173.35 from the previous close of Rs 177.75 on the BSE.

Send this article to Friends by E-Mail

Stories in this Section
Supply troubles dog Travancore Cements

Copyright © 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line