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April 19, 2001
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Money > Business Headlines > Report April 19, 2001 |
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L&T slams lid on cement unit fundingRumi Dutta Larsen & Toubro, the country's largest cement manufacturer, does not envisage making any further investment in its cement business. The strategic partner is expected to put in these investments for proposed expansion and thereby increase stake in the company. The company, in a presentation to investors recently, has said, "L&T will not commit further capital to its cement business." Therefore, the L&T shareholders would participate in a larger entity without contributing to the capital of the cement subsidiary. Though it was planning to initially offer the partner 26 per cent, and subsequently allow it raise stake to the same level as L&T, it is now considering whether an equal stake could be offered at the entry level. According to the company's plans, it would emphasise on increasing market share from 13 per cent to 17-20 per cent over 5 years in order to benefit from the improved economics as a result of consolidation, the capital requirement for which is substantial. The strategic partner would reach equal shareholding levels through a combination of secondary purchases and capital infusion into the cement company. "The time-frame and the exact shareholding pattern would be mutually agreed upon depending on the value of the cement business and the joint vision of L&T and the partner," L&T said in its presentation. Meanwhile, it is understood that Lafarge SA of France, Holderbank of Switzerland and Cemex of Mexico have already conducted due diligence. L&T, with a capacity of 15 million tonne, is the largest player in the sector. Its capacity will soon be enhanced by another one million tonne. Because of the extensive presence across the country, and a strong brand equity, the company is expecting a far higher valuation than any of the recent transactions in the domestic cement sector. L&T officials recently said that it expected a valuation comparable to recent international transactions of a similar nature. Powered by YOU MAY ALSO WANT TO READ:
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