COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

Grasim and Indian Rayon boards approve plan for single cement division

The boards of two A V Birla group companies, Grasim and Indian Rayon, have approved the restructuring plans of the cement business of the two companies at their respective board meetings held in Bombay today.

The restructuring plan, which envisages the consolidation of the cement business of Indian Rayon and Grasim into a single division of Grasim, will be executed, subject to the approval of financial institutions, shareholders, regulatory authorities, lenders, creditors and the court.

Indian Rayon will transfer its cement business as a going concern to Grasim by way of a scheme of demerger. Grasim in turn will issue shares or global depository receipts to Indian Rayon's shareholders / GDR holders at a swap ratio based on the recommendations of independent valuers appointed for this purpose.

According to Aditya Birla group chairman Kumarmangalam Birla, the move is essential to consolidate the cement business, so as to achieve business synergy in an increasingly competitive environment. ''An integrated and synergistic approach is vital to function more optimally in the changed scenario,'' he said adding that Grasim will emerge a much larger, vibrant and growth-oriented company with enhanced earnings potential.

Birla further said that the restructuring will also create value for Indian Rayon's shareholders, for in addition to their shareholding in Indian Rayon, they would receive shares in Grasim as well.

''Indian Rayon will continue to retain its healthy financials and have renewed focus on three core businesses,'' he remarked. ''This move is the group's first step in its vision for the next millennium. We hope to grow each company in revenues and earnings through a focused leadership in the areas in which we operate, evaluating businesses against stringent value creation parameters,'' commented Birla.

He said that the valuation reports of independent valuers appointed by Indian Rayon and Grasim (recommending the share entitlement ratio) would be placed before the boards at meetings to be separately convened for that purpose. At these ensuing board meetings the proposal for the demerger would be placed for final approval.

According to sources, the shareholders of Indian Rayon will be offered free of cost, shares of Grasim for the transfer of Indian Rayon's cement business to Grasim. The number of Grasim shares to be offered against each Indian Rayon share will be based on valuaton of the cement business being transferred.

Indian Rayon's cement capacity is three million tonnes of port-land cement and 0.36 million tonnes of white cement. The enterprise value of Indian Rayon's portland cement usiness is placed around Rs 2 billion to Rs 2.5 billion per million tonnes against the grassroot project cost of about Rs 3 billion per million tonnes of portland cement at current prices.

Grasim is a global leader in viscose staple fibre.

UNI