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Sebi asks for details on Grasim buy

The Securities and Exchange Board of India said on Wednesday it was "seeking information" from cement makers Grasim Industries and Larsen & Toubro about the Grasim's mid-November acquisition of a stake in L&T.

SEBI's executive director in charge of takeovers, R N Joshi, told Reuters that both companies had been asked to explain the price Grasim paid for the 10 per cent stake it bought in Larsen and Toubro, India's largest cement maker.

"We have also asked them if (a change in) management control is involved," Joshi said. "This is not a probe as such, but we are seeking more details from both companies and have given them a deadline of January 4 to furnish the information."

Indian stock market rules stipulate that a company acquiring shares in another should make an open offer to minority shareholders of the target company if its acquisition of a stake results in a change in management.

Grasim, which belongs to the Aditya Birla conglomerate, bought the stake in Larsen and Toubro from petrochemicals giant Reliance Industries for Rs 7.66 billion or Rs 306.60 a share, a 47 per cent premium to the market price at that time.

"The acquisition is totally in line with the laws of the land," said a Birla group spokeswoman. No immediate comment was available from L&T.

On November 18 Grasim announced it was buying into its rival but denied seeking management control.

Saurabh Misra, the head of the Birla group's cement business, told Reuters in an interview at the time of the acquisition, "We're not seeking management control but will support management as a long-term investor."

Investors' Complaint

Joshi said the details had been sought following a complaint by the Investors' Grievance Forum, a shareholders' body whose officials met the market regulator's chairman, D R Mehta, earlier in the day.

"We feel strongly that Grasim should make an open offer to shareholders or its nominees should resign from L&T's board," Bharat Kotecha, vice-president of the IGF told Reuters.

Grasim has nominated Birla group chairman Kumar Mangalam Birla and his mother Rajashree Birla to L&T's board. Kotecha said the two rival cement companies planned to cooperate in marketing their products.

"This is like Coke and Pepsi marketing each others' products," he said. "The Birlas are influencing L&T's decisions, and this is as good as a change in management control."

Kotecha said the IGF was trying to mobilise support for its stand with mutual fund manager Unit Trust of India and insurance companies Life Insurance Corporation and General Insurance Corporation of India, which together hold around 35 per cent of L&T.

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