Grasim offered the silver lining on a day of overall gloom on Monday, inching up 0.33% to Rs 330.60.

The scrip of the A V Birla group company and VSF producer has moved between Rs 331.65-Rs 326.15 today. However, volumes in the stock were thin, at just slightly over 9,000 shares on BSE.

The positive trend in Grasim resists the sharp setback suffered by the broad market over the threat of an US-Iraq war manifesting . The 30-share BSE Sensex was down 53.6 points to 3,054.60 at this juncture.

After rallying recently on the back of its strong Q3 results, the stock came off the higher levels in the last few trading sessions. From a high of Rs 354.10 on 27 February 2003, the stock lost 6.9% to Rs 329.50 on 13 March 2003. Subsequently, Sebi gave an all-clear ruling on the contentious issue of Grasim's gaining control over L&T.

Sebi has also asked Grasim to make a revised open offer for L&T. Sebi last week said that it has found nothing objectionable in the report by the investigating officer on the issue of control by Grasim of L&T and, hence, has asked the Aditya Birla group company to come up with a revised open offer.

Sebi had earlier stayed Grasim's open offer for an added 20% stake in L&T and set an investigation on the matter of whether Grasim had acquired control over L&T after it bought a 10% stake in L&T from Reliance in November 2001. Analysts feel that Grasim has been vindicated by the latest Sebi ruling considering the huge investment it had made in L&T . After acquiring a 10% stake in L&T from Reliance, Grasim had mopped up further shares from the open market raising its stake to about 15% before it announced the open offer at Rs 190 in October 2002.

A professionally managed company, L&T has a large institutional holding (44% as on 31 December 2002). The consensus of institutions will now be crucial, if Grasim wants to boost stake in L&T.

But it is reckoned that Grasim's proposal for the de-merger of L&T cement's business would lose significance now given that Grasim will come out with an open offer for L&T. Earlier, Grasim had made a proposal for vertical de-merger of L&T's cement business into a separate company and for making an open offer for acquiring control over the proposed new cement company at a price of Rs 130 per share. Grasim Industries had made the proposal to L&T's management on 27 January 2003 and this proposal was circulated by L&T's board at its meeting held on 29 January 2003.

Grasim has two major business segments - cement and engineering & construction. Grasim had valued the cement business at Rs 130 per share. This was based on a combination of methods and the ratio of equity value of the remaining L&T business to the equity value of the cement business is 1.25:1. On a sum of parts basis, assuming that a vertical de-merger would create two separate entities, and on a relative basis, Grasim has valued the cement business of L&T at Rs 130 per share and the remaining businesses of L&T at Rs 162.50 per share and hence, with that assumption in mind, the equity value of L&T works out at Rs 292.50 per share.

Meanwhile, the cement industry continues to be worried by the weakness in cement prices due to a supply overhang. Demand, in contrast, remains sufficiently upbeat.

BSE code: 500300

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