The demerger of Larsen & Toubro's cement business saga, involving the L&T management and the Birlas, is set to see a new twist.

Credit rating agency ICRA, which has been mandated to recommend the mode of demerging L&T's cement business, is now expected to table a third independent demerger plan.

ICRA will informally meet the management of L&T and representatives of its major shareholders on the board on Friday, when the new proposal is expected to be tabled, sources close to the L&T board said. Details of the new proposal could not be ascertained at this stage.

ICRA will also outline the merits and demerits of each proposal that has been submitted so far to expedite decision making at the crucial board meeting slated for May 29. Senior L&T executives confirmed the Friday meeting, but declined to outline the agenda.

The financial institutions, which hold over a 40 per cent stake in L&T, said their decision to continue as shareholders in L&T would depend on the report.

Sources close to another shareholder group in L&T said: "A third proposal now when the Grasim open offer is on would only further complicate the situation."

While the L&T management wants a structural demerger of the cement business, wherein only 25 per cent is offered to existing shareholders, the Birlas want shareholders to be given shares in the demerged cement business in the same proportion as their existing shareholding.

The original CDC proposal to acquire a strategic 6 per cent stake in the cement company had come with many riders.

But the Birla proposal, on the other hand, puts a stop to any future strategic divestments in the cement company.

The May 29 board meeting will take place barely seven days before Grasim's 20 per cent open offer for L&T, at Rs 190 a share, closes.

Grasim is allowed by the Securities and Exchange Board of India rules to change the terms of the offer only seven days before the close of the offer.

If a demerger of the cement business is approved, Grasim has said it would make another open offer for the cement company at Rs 130 a share.

Grasim has already put over Rs 1,000 crore (Rs 10 billion) into L&T for its 15.35 per cent stake. If the current offer is fully subscribed, it would see an outflow of another Rs 900 crore (Rs 9 billion).

If Grasim makes a second offer for the 16.5 million tonne demerged cement business, it could lead an additional investment of Rs 600 crore (Rs 6 billion) if the offer is fully subscribed to.

The flashpoint

• ICRA will outline merits and demerits of each proposal.
• FIIs role as stakeholders depends on the report.
• Shareholders feel development may complicate issue.