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Sebi asks Birlas to defer L&T offer

BS Corporate & Markets Bureau

In a stunning decision, the Securities & Exchange Board of India has asked the Aditya Birla group flagship Grasim Industries to put on hold its open offer for Larsen & Toubro.

Sebi has asked the Birlas' merchant banker JM Morgan Stanley to defer the offer till the ongoing issue of Gujarat Ambuja's alleged "control" of ACC is resolved. Sebi confirmed it would look at the issue of offer pricing too.

This follows a directive from the Securities & Appellate Tribunal asking Sebi to reopen the Gujarat Ambuja-ACC case, and ascertain whether Gujarat Ambuja, which has a 14.45 per cent stake in ACC, actually has management control in the former Tata company.

However, Grasim plans to appeal to SAT against the Sebi order. Sebi officials said that they had not yet been served with any notice against its order, but said that Grasim would not be able to continue with the open offer till it received the regulator's go-ahead.

A Birla spokesperson said: "Grasim has complied with all regulations and acted in line with the highest standards of corporate governance. Since the matter is now sub-judice, it would be inappropriate for us to comment. We have strong conviction in our rights in law."

Grasim last year bought the Reliance group's 10.05 per cent holding in L&T, and got L&T board approval for two board berths. Since then, it has hiked its stake in L&T through the creeping acquisition route and made a 20 per cent open offer last month at Rs 190 a share as its holding was about to pierce the 15 per cent trigger point.

Though the offer price conforms to Sebi guidelines on the 26-week average of high and low prices, some minority shareholders and financial institutions have sought a higher price. The FIs, with a 36 per cent stake are the single largest body of shareholders in L&T.

Both institutions and other shareholders have sought a price of Rs 306 a share, the same at which the Birlas bought out Reliance. Sebi officials said: "The pricing issue too has to be looked at."

In the Gujarat Ambuja-ACC case, Ambuja had bought out the Tatas from ACC in two stages, picking up a 14.41 per cent stake in the process at Rs 370 a share.

Ambuja too has two nominees on the ACC board, but has maintained that its investment in ACC was purely "strategic", and that it had no control of the day-to-day affairs at ACC. Hence, it had said there was no legal obligation to make an open offer. ACC calls itself a professionally managed company and without any identifiable promoter group.

Grasim has already invested around Rs 1,000 crore (Rs 10 billion) in L&T for its 15.5 per cent stake, and could end up paying another Rs 750 crore (Rs 7.5 billion) plus if the open offer gets fully subscribed.

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