Ramnath Subbu
The Hindu
Mumbai, 6 July 2004

Larsen & Toubro (L&T) and Grasim Industries today announced the completion of the scheme of demerger of L&T's cement division — UltraTech CemCo (UTCC) — with Grasim having acquired a majority stake in it.

Addressing the media here today, A. M. Naik, Chairman and Managing Director, L&T, said, "This transaction has helped to unlock value for shareholders and position the demerged L&T as a focused engineering, construction and technology company. We have more than 60 businesses in these areas. In future, we want to concentrate on areas such as nuclear, aerospace and defence. We want to become an Indian MNC (multi-national company) in engineering." The shareholding pattern of UTCC is 51 per cent with Grasim, 12 per cent with financial institutions, 11.5 per cent with L&T and the remaining with institutional and retail shareholders.

Kumar Mangalam Birla, Chairman, Aditya Birla group, said UTCC would be listed in the next few days on the Bombay Stock Exchange. Also, UTCC now has in place a new board of directors, includeing two nominees from the institutions, two from L&T — Mr. Naik and Deosthale, four from Grasim, namely, Rajashree Birla, Kumaramangalam Birla, S. Mishra (Corporate & HR Director, Grasim) and D. D. Rathi. There are also two independent directors — R. C. Bhargava (former Managing Direcor, Maruti Udyog) and Arun Gandhi (Tata Sons). Saurabh Mishra will be the Chief Executive Officer of UTCC. Both Ms. Rajashree Birla and Mr. Kumarmangalam Birla will step down from the board of L&T. Mr. Birla said, "The transaction reflects our commitment to build a leadership position in cement. We believe that it will take about 2-3 years for UltraTech to provide a competitive return on the aggressive price offered to its shareholders. It is also gratifying because the transaction has created value for Grasim and L&T stakeholders, the share prices of L&T and Grasim since the June 2003 announcement of the intention of de-merger, have out-performed the BSE Sensex and there has been an overwhelming response to the open offer."

On plans for branding the cement made by UTCC, Mr. Birla said, "By the end of this financial year, we hope to phase out the L&T brand and launch a national brand to replace it. We hope to launch the new brand after the monsoon season and phase it in by March 2005. In the future, we are looking at having two national brands in cement and two or three regional brands."

Elaborating Grasim's interest in cement, Mr. Birla said, "We are aggressively seeking to achieve our goal of being the market leader in cement. The overall demand is 117 million tonnes and at 8 per cent growth; we are looking at a demand of 200 million tonnes by the turn of the decade. We have to move ahead of the market. Our interest in L&T was because of its intellectual capital in its cement business. We will look at brownfield, greenfield and inorganic ways to expand."