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Sebi: Birlas' stake buy meant to control L&T

BS Markets Bureau in Mumbai

The Securities and Exchange Board of India has taken the view that the entire Grasim acquisition of Reliance Industries' stake in Larsen & Toubro was structured in a way to ensure that the Birlas take management control of the company.

In its affidavit filed with the Securities Appellate Tribunal, Sebi said the appointment of two directors on the board of L&T was not done at the instance of the engineering and cement najor. It was Grasim's decision.

SAT will give its order on the Grasim appeal for a limited interim relief in a day or two. Grasim has said that its open offer should go on without Sebi's interference.

Arguing the case at the SAT hearing, Sebi laywers said that the agreement entered into between Reliance and Grasim at the time of the acquisition was that RIL or its associates would not hold any securities in the company in any manner which would have voting rights nor would they acquire any equity shares from the market. This agreement would be in force for five years.

The agreement also said that RIL would arrange to convene an L&T board meeting to inform the board of the transaction and get its approval.

All these indicate the possibility of an intention of management control by Grasim, Sebi contended. It was also bolstered by further purchases in the market by Grasim during the year to consolidate its holding in L&T, the Sebi lawyer argued.

"If the seller is obliged not to buy the shares of the target company then it has to be added to the fact that Grasim further raised its stake in the company through market purchases," the Sebi lawyer pointed out.

Sebi is also looking at the manner in which Grasim appointed its directors on the L&T board. According to Sebi, it was not done at the instance of L&T, an argument put forward by Grasim lawyers.

Grasim in its rejoinder to the Sebi affidavit said that on or around November 22, 2001, during a conversation between the L&T company secretary and the president (legal) of the Aditya Birla group, the former suggested that the appellants could write a letter recommending the names of two persons who could be considered for appointment to the L&T board.

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