Fallout of Grasim-RIL deal

By Our Special Correspondent

CHENNAI, NOV. 19. The acquisition of Reliance holding in Larsen and Toubro (L&T) by Grasim Industries, the flagship company of the Aditya Birla group, will have a twin fallout in the near- term. Both are expected to cheer up the domestic cement players who are trying hard to come to terms with an unstable price scenario.

For one, the Grasim's entry into L&T may have pushed the threat of MNC (multinational companies), looming menacingly on the Indian horizon until yesterday, out of the vicinity of the local players. At least for some time to come. For another, an L&T under Grasim grab is expected to bring about a greater discipline among players which, in turn, is seen to trigger a civilising influence in the marketplace.

The 10 per cent stake will surely give Grasim a say, if not a complete hold, on the cement business of L&T. Already a major player controlling close to 13 million tonne capacity, the A. V. Birla group is bound to take an active interest in the cement division of L&T.Though professionally managed, the construction giant has always been viewed as a renegade by most of the cement makers. More often than not, L&T, it is pointed out, has strayed away from the majority view and indulged in unhealthy price war, much to the chagrin of the rest of the cement industry. Now that someone who knows inside out of the cement business has taken a reasonable equity stake in the company, there is greater optimism in the industry that L&T will approach the marketplace with lot more responsibility.

The Ambanis have not just let the A. V. Birla group gain a toe- hold in L&T. But they have effectively shut out MNCs from walking away with a huge chunk

of cement capacity. Three overseas majors - Holcim, Lafarge and Cemex - were in the running to pick up 37.5 per cent stake in the proposed de-merged cement entity of L&T. Surely, the Ambains have poured cold water into their gameplan. Usually, the videshi companies will look for large capacity to buy.ACC did provide opportunity for them. But Gujarat Ambuja group had pipped them at the post and annexed 14.5 per cent Tata stake in the company gaining in the process control of close to 15 million tonne capacity. Next to ACC, L&T has held promise for these foreign companies.

Grasim has now put paid to their dreams. No doubt many a single unit player has put up their fragmented

capacities on the shopping list, squeezed as they are by an assortment of factors caused by competitive environment. Industry analysts feel that MNCs will not have either the mind or patience to go after these fragmented capacities.

The threat from MNCs appears to have been repulsed by Grasim's entry into L&T and the consequent non-availability of `chunk of capacity' to buy. Surely, the protagonists of swadeshi will sport a broad grin on their faces. Well, the consumers may not really emerge as the king in this unfolding scenario.

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Section  : Business
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