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Restructured Grasim expected to take on L&T, ACC

The boards of Grasim and Indian Rayon of the Aditya Birla group today met in Bombay and formally approved transfer of the latter company's cement division to the former and the attendant scheme of agreement and the share entitlement ratio.

With the restructuring, Grasim is expected to compete neck-to-neck with cement giants L&T and ACC while acquiring a national presence.

Chairman and managing director of the group Kumaramangalam Birla said the exercise will entitle Indian Rayon to transfer only its cement business to Grasim. Details of the arrangement have already been published.

Birla announced that the cement division will be headed by M C Bagrodia, supported by manufacturing head C P Jajoo and marketing and strategy head O P Puranmalka.

Indian Rayon will now completely focus on building its industry leadership in viscose filament and spun yarn, insulators and carbon black. The company had enlisted the services of leading external professional teams to attain its goals.

The proposed restructuring plan is now going to be filed in the courts of Gujarat and Madhya Pradesh and will come up for shareholder and lenders'/creditors' approval later. Additionally, it will be subject to various further approvals including those of Indian financial and investment institutions and regulatory authorities.

Birla, to a query on options before the company, replied that the board of directors of both the companies have considered several restructuring options, including a merger and forming a new company, before choosing this route of transfer of business.

Creation of a new company, he said, would have entailed a high transaction cost and would not provide the cash needed to grow earnings.

In contrast, this scheme is cost effective, provides strong growth prospects, enhances earning per share and increases focus and synergies.

UNI