L&T to sell its 11.5 % in UltraTech

At Friday's Price, Sale Could Fetch Engineering Giant Rs 800 Crore, Prop Up Bottomline

LARSEN & Toubro (L&T) will sell its 11.5% stake in the Aditya Birla group company UltraTech Cement by December. Pegged at around Rs 800 crore at Friday's market price, the sale proceeds will prop up L&T's bottomline in 2009-10.
    The company will also realise a further Rs 100 crore of other income from the sale of its ready-mix concrete assets in 2009-10. It had sold that business to Lafarge in 2008 for Rs 1,480 crore, and around Rs 100 crore has been pending from this transaction.
    L&T chairman AM Naik told ET that the Birla group enjoys the right of first refusal on its stake in UltraTech. "We can offer it to a third party if they (the Birla group) don't buy." Mr Naik added that the Birlas and L&T had not spoken on this issue. "It's not a complicated matter. We will sell the shares at the right price at the right time," he added. Industry observers feel that the Birla group would almost certainly buy L&T's shareholding. L&T would have to sell its stake by the year-end under the terms of an agreement with Grasim signed in 2003. The agreement had helped end an epic corporate battle, during which Grasim made an open offer for L&T. It ended with L&T selling its cement business to the Birlas.
    Mr Naik said L&T may sell some other non-core assets, without divulging details. In principle, L&T wants to pull out of businesses which are at sub-Rs 500 crore levels, he said. The medical devices business was no longer on the block as L&T failed to get the 'right price'. "We are investing heavily in the medical devices business to make it a Rs 500-crore plus division. But even if that does not happen, the business will be attractive enough to get a suitor," according to Mr Naik.
    L&T would not provide for 'notional loss' on its investments in Satyam this year. "Our investments in Satyam have a six-month lock-in. I hope to make a profit from the investments. However, if we can't, we can adjust the loss with other short-term capital gains and enjoy tax benefit," Mr Naik said. L&T, Grasim relations have improved
L&T has invested Rs 700 crore to pick up a 12% stake in Satyam, but lost out to Tech Mahindra in the race to acquire the Hyderabad-based software company.
    The genesis of L&T's shareholding in UltraTech can be traced back six years ago when the Aditya Birla group company, Grasim, took over Reliance Industries' stake in L&T and raised it further to 15.73%. Grasim subsequently made an open offer to L&T's shareholders.
    L&T resisted the takeover attempt, but spun off its cement division, which was later rechristened as UltraTech into a separate entity and sold it to Grasim as a part of a compromise deal. Grasim had, in turn, sold its 14.95% stake in L&T at Rs 120 a share in favour of L&T Employee Welfare Trust, a trust belonging to L&T employees. In an independent transaction after restructuring, L&T picked up an 11.49% stake in UltraTech Cement.
    Both the parties have been engaged in a legal tussle over the payment of dividend on Grasim's stake in L&T. The dividend tiff had flared up over the price, at which the remaining stake held by Grasim, (which was initially 0.87%, but later came down to 0.62% because L&T expanded its equity base) was to be sold.
    L&T claimed that the Grasim stake should be sold only to L&T Employees' Welfare Trust at "a predetermined rate of Rs 240 a share," according to its interpretation of the agreement signed in 2003. Grasim said it would sell L&T's shares only at the market rate. The relationship between them improved recently, after L&T agreed to pay dividend on Grasim's stake in L&T, along with arrears after a court order, which was favourable to Grasim.
    kausik.datta@timesgroup.com 

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