Grasim Falls Most in 11 months as business removed

Grasim Falls Most in 11 months as business removed
05 October 2009

Grasim Industries Ltd., India’s third-biggest cement maker, fell the most in almost 11 months in Mumbai trading after saying its cement business will be transferred to a subsidiary, Samruddhi Cement Ltd.

The shares dropped 4.9 per cent to 2,559.5 rupees as of 12:54 p.m. local time, after declining as much as 7.5 per cent, the most since Oct. 27. Grasim, a unit of the Aditya Birla Group, is today’s worst performer in the Bombay Stock Exchange BSE500 Index, which lost 0.7 per cent.

Shareholders in Grasim, which last year got 70 per cent of sales from cement, will get one share with a nominal value of 5 rupees in the unlisted subsidiary for each share they hold. Samruddhi will propose merging with UltraTech Cement Ltd., a part of Aditya Birla that plans to cut costs to make it easier to raise funds and expand cement output.

“This de-merger doesn’t prove to be convincing because it doesn’t give shareholders any revenue visibility,” said Vrajesh Mehta, a Mumbai-based analyst at KR Choksey Shares & Securities Ltd., who rates the stock as “hold.” “The main reason seems to be for their financing issues.”

With the cement business removed, Grasim’s biggest source of sales will be viscose staple fiber, a component used to make tires and textiles. The company plans to spend 10 billion rupees ($210 million) to build a new plant to make the fiber, which last year gave it 15 percent of sales.

Source: Bloomberg
Published under Cement News