In internal meetings following the presentation of the Investment Credit Rating Agency's report on the proposed demerger of the cement business, the Larsen & Toubro management has criticised the recommendations as being against the interests of the shareholders.

The management could even junk the final report if it seemed to be heavily in favour of Grasim's demerger proposal, sources close to the L&T board said.

This will indicate that the battle for control of L&T's cement division is far from over and the company's management is willing to fight for retaining control of the business.

"ICRA only analysed the two proposals in our last meeting. So far, its analysis is tilted towards the Birlas' proposal. However, if the final report fails to take care of the shareholders' interests, we will not keep quiet," said a source close to the L&T board.

Company executives said the management would take necessary steps to safeguard the interests of the shareholders and would not compromise on this issue under any circumstance.

The L&T board has seven executive directors, apart from Chairman Emeritus H Holck-Larsen, on the 18-member board. The financial institutions, which hold about a 40 per cent stake in the company, have still not decided which way to take in the demerger drama.

ICRA will now meet all the shareholders' groups of L&T separately and address the clarifications raised in the meeting held on May 23. It will then present its final report on the issue.

The next L&T board meeting is slated for May 29, but the issue will not figure at the meeting.

Grasim's open offer for L&T at Rs 190 a share is currently on. It has proposed another open offer for L&T's cement business, if a vertical demerger takes place, at Rs 130 a share. The company has already invested Rs 1,000 crore (Rs 10 billion) in L&T for a 15.5 per cent stake in it.

If the current offer is fully subscribed, Grasim will see an outgo of around Rs 900 crore (Rs 9 billion). If its second offer is also fully subscribed, it will have to spend another Rs 600 crore (Rs 6 billion).

The L&T management, however, wants to retain 75 per cent control of the demerged cement business and dole out just 25 per cent stake to the existing shareholders.

The fight is on

• ICRA analysis appears tilted towards the Birla proposal.
• L&T says shareholders' interest is its priority.
• FIs still undecided on the demerger plan.