Both Grasim and L&T were boosted in early trades on Monday after Sebi cleared Grasim of charges of violating the Takeover Code while acquiring L&T.
L&T gained 2.58% to Rs 191.10 and Grasim Industries rose 0.46% to Rs 331 on BSE by 10:05 IST. Both companies are focused on the cement sector.
Sebi last week said that it found nothing objectionable in the report by the investigating officer on the issue of control by Grasim of L&T and, hence, has asked the Aditya Birla group company to come up with a revised open offer.
However, Sebi did not give any indication of its stance on the issue of insider trading by Grasim, L&T and Reliance in L&T shares, subsequent to the acquisition of an around 10% stake in L&T by Grasim from the Reliance group in November 2001.
Sebi had earlier placed a stay on Grasim's open offer for an additional 20% stake in L&T at a price Rs 190 per share. Grasim had made the open offer after it acquired an over 15% stake in L&T through creeping acquisitions.
Latest media reports now suggest that Grasim might increase the open offer price to Rs 225-240 per share if the financial institutions do not support the demerger of L&T's cement division.
The L&T board had earlier decided to de-merge the cement division of the company despite acquirer Grasim's disinclination. Subsequently, Grasim placed a proposal before the L&T board for vertical de-merger of L&T's cement business into a separate company and for making an open offer for acquiring control over the proposed new cement company at a price of Rs 130 per share. Grasim Industries had made the proposal to L&T's management on 27 January 2003 and this proposal was circulated by L&T's board at its meeting held on 29 January 2003.
Grasim has valued the cement business at Rs 130 per share. This is based on a combination of methods, and, the ratio of equity value of the remaining L&T business to the equity value of the cement business is 1.25:1. On a sum of parts basis, assuming that a vertical de-merger would create two separate entities, and on a relative basis, Grasim has valued the cement business of L&T at Rs 130 per share and the remaining businesses of L&T at Rs 162.50 per share and hence, with that assumption in mind, the equity value of L&T works out at Rs 292.50 per share
For the third quarter ended 31 December 2002, L&T registered a 48% rise in net profit to Rs 80.67 crore on a 31% increase in total income to Rs 2,371.72 crore (Rs 23.71 billion). Grasim reported a 48% growth in profit after tax to Rs 132.95 crore on an 11% growth in net sales to Rs 1,166.59 crore (Rs 11.66 billion).
BSE code: 500300