Grasim sprang to its 52-week high at Rs 448 early today, after the company decided to move towards acquiring L&T's cement business that is proposed to be de-merged.

Even as the stock of the VSF and cement maker eased a bit to Rs 447.15 by 10:05 IST, it was still trading 10.08% over its yesterday's close. Nearly one lakh Grasim shares were traded on BSE till then. Grasim Industries has now risen 86.3% from Rs 240 (its 52-week low) on 17 December 2002.

On Tuesday, Grasim Industries acknowledged the fact that Larsen & Toubro (L&T)'s board of directors has approved the proposal for restructuring the latter's cement business. Grasim Industries now has proposed to acquire 8.5% stake in L&T's cement business, with the likely investment amounting to around Rs 362 crore.

After the initial acquisition, Grasim plans to make an open offer to the shareholders of the de-merged cement company, at the same price at which it buys the 8.5% stake in the cement business, thereby acquiring management control. The maximum likely investment through the open offer would be around Rs 1,278 crore. Grasim and its associates will also sell stake in the de-merged L&T (minus the cement business) for cash of around Rs 470 crore.

The net additional cash outflow for Grasim in purchase and sale of investment is anticipated at Rs 1,170 crore. The total investment (including earlier investment) is expected to be Rs 2,190 crore. The detailed scheme of arrangement will be developed, in compliance with regulation, over the next few weeks.

For Grasim, the deal, if materialises, will prove a real bargain. An earlier evaluation by a leading consulting firm had, in fact, put L&T's cement division's valuation at Rs 240 per share. With Grasim acquiring L&T's cement division, it will automatically become the largest cement producer in the country. In addition, Grasim Industries' reach will widen as L&T is dominant in the southern and eastern regions of India, while Grasim has a foothold in the west. The negotiation power of the company in terms of price fixation will also increase.

For Q4 ended 31 March 2003, Grasim posted a net profit of Rs 49 lakh compared to a net profit of Rs 79.23 crore. Total income increased by 8.3% to Rs 1,267.06 crore from Rs 1,169.86 crore. For FY 2002-03, net profit jumped by 21.3% to Rs 367.58 crore from Rs 302.96 crore. Total income grew by 5.3% to Rs 4,742.13 crore from Rs 4,501.26 crore.

Grasim recently said that its outlook is bright with all its major businesses contributing to the improved performance. The company has started focusing on operational excellence, cost optimisation, effective financial management, continuous restructuring of business processes etc.