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FIs to review Birlas' presence on L&T board

N Mahalakshmi in Mumbai

The financial institutions are planning to schedule a meeting soon to take a call on the 'reconstitution' of the board of engineering and cement major Larsen & Toubro.

The primary agenda of the meeting will be to review the presence of Grasim nominees Kumar Mangalam Birla and Rajashree Birla on the L&T board, though reconstitution could also mean, among other things, putting more FI nominees on the L&T board, institutional sources said.

The institutions are the single largest body of shareholders in L&T with a combined stake of 36.96 per cent.

The institutions view the Grasim nominees presence as objectionable given that there is a possibility of a "conflict of interest."

A Birla group spokesperson declined comment on the issue while L&T managing director AM Naik could not be reached for comment.

The institutions have already expressed their displeasure at the open offer price on grounds that is far lower than the intrinsic value of the company and about 40 per cent lower than the price offered by Grasim to Reliance Industries.

Sources confirmed they would not subscribe to the open offer at the current price.

"We will not be willing to tender our shares for anything lower than Rs 306" said a source at the Unit Trust of India.

The institutions, led by the Life Insurance Corporation of India, the largest stakeholder in L&T, will meet just before the offer opens on December 9, 2002, institutional sources said.

The institutions feel that by sitting on the L&T board, the Birlas are privy to key commercial and strategic decisions taken by the L&T board which leads to a 'conflict of interest.'

Grasims cement business will clash with L&Ts cement business and the latter may run the risk of having to live with commercially unfavourable decisions. This will not be in the interests of the existing L&T shareholders, sources said.

Currently, the L&T board has 17 members. Apart from the chairman emeritus and seven functional directors, there are four institutional nominees, two independent directors, one representative of J M Voith (a company which merged with L&T), and two representatives of Grasim.

The two Birla representatives were inducted in place of Reliance nominees Mukesh Ambani and Anil Ambani.

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