HC clears L&T cement demerger

The Bombay High Court on Thursday cleared the proposal of Larsen & Toubro for the demerger of the cement division of the company. This has paved the way for the demerger of the cement division into a separate company Ultra Tech Cemco""which will eventually be controlled by the country's third largest industrial house"" the A V Birla group.

Under the scheme, the shareholders of L& T will hold 80 per cent in the new cement company, while the balance 20 per cent stake will be held by the company Larsen & Toubro.

As a result of the demerger, the AV Birla group will hold 12 per cent stake in the cement company and buy another 8.5 per cent from L&T. It will then make an open offer for another 30 per cent to hike its stake to around 30 per cent. Further, the L&T employees trust will buy out the AV Birla group's 14.78 per cent stake in L&T.

" The judgment sanctioning the scheme was pronounced in court today and a copy of the detailed order is expected to be received in a few day's time. On receipt of the order, the process of implementation of the scheme will commence and the company will fix and declare the effective date," L&T said in a media release.

Y M Deosthalee, director and CFO of L&T said that the entire process will take another four to five weeks. "We now have to transfer the licences and patents of the trademarks of the cement business to the new company. Then we will have to fix the book closure date," Deosthalee said.

The L&T stock closed 5.30 per cent higher at Rs 629.85 today against the previous day's close of Rs 598.15. The stock touched an intra-day high of Rs 641.90.

The genesis of the current demerger lies in the A V Birla group buying out the Reliance group's stake in L&T through flagship Grasim. The company then hiked its stake to over 14 per cent and then made an open offer for 20 per cent. This was opposed by the professional management of L&T and resulted in a legal tangle. Finally, the current formula was worked out with the help of politician S Gurumurthy.