Currently India’s largest cement producer with a capacity of 23.1Mta, UltraTech is reported to be about to boost its lead nationwide position with the addition of 22.5Mt of capacity from its majority partner Grasim Industries, which currently has a 55 per cent stake in the group.
Currently, UltraTech operates in the central, southern and western regions, while Grasim has its presence in the northern region. Although Grasim spokesmen are unwilling to confirm the deal, the demerger of its own 22.5Mt separate range of cement assets operated via Grasim/Birla subsidiaries is likely to be confirmed at its own parent group – Aditya Birla - board meeting planned for October 3rd in Mumbai.
Adesh Gupta, group executive president and chief financial officer, Grasim had earlier said to local reporters, “The merger would happen eventually, but when this would happen, one cannot say.” The Aditya Birla group acquired the cement business from Larsen & Toubro Ltd, India’s biggest engineering company, in 2003 and renamed it UltraTech. The company made its trading debut in August 2004. The deal is likely to be worked out in phases and could involve a possible share swap worth INR95bn (US$1.98bn). It is also being speculated that the cement business would first be transferred to a special purpose vehicle before moving to UltraTech. This would leave Grasim to focus on its other businesses like textiles, VSF and chemicals. Grasim’s revenues of INR10,940 crore (fiscal year ended March 31, 2009) were largely driven by cement, which contributed 64 per cent. Grasim has been the flagship company of the AV Birla group and had started as a textile manufacturer way back in 1948.
However the market has not reacted well to the speculation as the Grasim stock was knocked down 2.44% or INR67.55 on the BSE to close at INR2,700.80 per share as compared to its previous close of INR2,768.35. UltraTech, however, shot up 6.37% or INR50.80 to close at INR848.90 as compared to Wednesday’s close of INR798.10.