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L&T kept us in the dark, say Birlas

Arijit De & Rumi Dutta in Mumbai

Aditya Birla Group flagship Grasim Industries, which has a 15.35 per cent stake in Larsen & Toubro, has written to the L&T management seeking details of its plan to demerge the cement business.

The Birlas' contention appears to be that, despite being a significant shareholder in L&T, with two board nominees, the Birlas have been kept in the dark about the management's plan for the cement business.

Sources close to the Birlas said: "We have not been told what the demerger plan is. We don't even know what L&T's plan is, apart from what we read in the press. The demerger issue has cropped up in board meetings only once in the last year. This was at the last board meeting of October 29, and that too only in passing."

Grasim's letter to L&T was despatched earlier this month. "The Birlas could add value to any proposal that comes to the L&T board. But they can only do so if they get to know what L&T plans to do," the sources said.

The Birla sources also stated for the first time, that differences with the L&T executive management existed.

"We have no idea what it has arisen out of. It could be some insecurity on their part," they said.

Asked pointedly whether the Birlas would eventually try and remove L&T managing director A M Naik, they replied: "Toppling him has not crossed our minds. We don't think like that."

They added that the L&T management had been kept apprised regularly that Grasim had no plans to de-stabilise it.

"We are not opposed to hiving off the cement business. What we are opposed to is the manner in which it is to be hived off," they added.

This underlined the point that the Birlas did not have management control at L&T, the sources pointed out.

"Whether board control or operations control, it's apparent that we don't have control," they said.

If the cement business is to be hived off, the Birlas favour a vertical split wherein the existing shareholders would get a stake in L&T Cement, the demerged entity, in proportion to their existing shareholding in the parent company.

However, the Birlas are opposed to the structured split designed by the L&T management wherein initially only 25 per cent would be offered to the existing shareholders while the balance would be offered to a strategic partner and financial investors.

At a later stage, the ratio would be reversed to 25:75, that is, 75 per cent of L&T Cement's equity would then be offered to a strategic investor.

"The structured split is certainly not favourable to any L&T shareholder. But it keeps the L&T management in control of the demerged cement business," Birla sources said.

Naik seeks FM's appointment

Larsen & Toubro managing director A M Naik has sought an appointment with finance minister Jaswant Singh to discuss Grasim's bid to gain control of the company.

The finance minister's office is working on finding a slot for Naik in Jaswant Singh's schedule in the next few days.

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