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L&T bids for Raasi, Visaka

S Ravindran & Rumi Dutta in Mumbai

In a clear indication that the Larsen & Toubro management is charting a course independent of the A V Birla group, L&T, which is also India's largest cement player, has put in an expression of interest to acquire Raasi Cement and Visaka Cement, the two India Cements subsidiaries on the block.

The bid is significant because it comes close on the heels of the L&T management's opposition to A V Birla group company Grasim's open offer.

Grasim had around a 15.5 per cent stake in L&T, and had put in a bid for the two cement plants earlier, sources close to the development said.

They added that L&T had even signed the non-disclosure agreement that was required to go ahead with a due diligence.

Citibank is the investment banker representing India Cements. The other bidders include Lafarge and Italcimenti.

Senior L&T executives declined to comment on the issue. But an L&T source said: "The southern market is of strategic importance to L&T. Currently, our market share in the south is around 12 per cent and to maintain our leadership we are considering all opportunities."

"A greenfield project is not the right thing to go in for, given the current market dynamics, but as a national player we are keen on ensuring a leadership position in all markets. We are hence exploring all the methods of expansion, including hiking capacity utilisation, de-bottlenecking, increasing the proportion of blended cement, as well as acquisitions," the source said.

A senior India Cements executive said the company had not yet received a formal bid from L&T.

"We are exploring various options to monetise our assets. It can either be a strategic stake sale to a potential partner or an asset sale. We have mandated Citibank to work on the deal," he added.

The successful bidder will get access to the 2.2-million-tonne Raasi Cement capacity and the 1-million-tonne Visaka Cement capacity. Both plants are located in Andhra Pradesh.

Industry sources said India Cements was seeking a price of close to $100 a tonne, which could put the acquisition cost at around Rs 1,700 crore (Rs 17 billion).

If L&T manages to acquire both the units, it will, with its 2.55-million unit at Tadipatri in AP, emerge as the strongest player in the south.

Grasim, on the other hand, has a 2-million-tonne plant in Karnataka and another 1-million-tonne plant in Tamil Nadu.

India Cements was saddled with debts of around Rs 1,800 crore (Rs 18 billion), primarily on account of the acquisition spree it had gone on five years ago.

In 1997, it acquired Visaka and a year later it took over Cement Corporation of India's 400,000-tonne Yerraguntla plant, followed by the acquisitions of Raasi Cement and Shree Vishnu Cement.

India Cements sold the Sree Vishnu unit in January this year to Zuari Cement, realising Rs 349 crore (Rs 3.49 billion) in the process.

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