Financial institutions, the largest shareholder group in Larsen & Toubro, are to meet on Friday to decide whether they will collectively negotiate for the sale of their stake in L&T's demerged cement entity or will individually deal with the Birlas on the issue.
The institutions also plan to discuss among themselves the two proposals put up by the L&T management and Grasim. What is more, the FIs have decided in principle to stop buying L&T shares from the open market.
"A vertical split (in L&T Cement) is inevitable. Our primary aim is to derive the maximum value out of our holdings in the proposed cement unit. If offered a good value, we are open to offloading our entire stake in the cement company. We are not opposed to the Birlas gaining management control in the cement company. However, we have no plans to dilute our holding in the parent company," an executive at one of the financial institutions said.
Since the FIs' primary interest was only to consolidate their stake in parent L&T, to a level to which the company is no longer under threat of a takeover, they seem to be satisfied with their current holdings.
Picking up an additional stake, only to get a higher proportionate share in the cement company, is not on their business agenda.
The FIs are sticking to their earlier stand of not diluting their holding in the parent L&T. This is keeping in mind L&T's presence in the defence sector.
If they have decided to stop buying L&T shares from the open market, it is because in a vertical split they will get a holding in proportion to their existing stake in the parent L&T.
According to institutional sources, their stake in the parent company is enough to prevent anybody from taking management control.
Also, with their plans to sell their holding in the demerged cement company, it makes little sense to further increase their stake in L&T.
Meanwhile, the FIs have asked the Birlas to make a collective presentation to all the institutions.
The Birla camp has been making presentations to each of the FIs. Birla group officials said they had discussed their ideas and alternative plans with the institutions but were yet to formalise the final proposal.
The major institutional shareholders of L&T include Life Insurance Corporation, General Insurance Corporation, Unit Trust of India and Industrial Development Bank of India. Collectively , they hold close to a 42 per cent stake in the company.
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