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Grasim to set Greenfield VSF plant at Vilayat, Gujarat
05
Oct '09
Mr. Gupta elaborated that the other options which were considered, include

i. a demerger into an independent company (vertical split), which might have given more direct holding to Grasim shareholders but would have resulted in loss of Grasim's strategic interest;
ii. merger of UltraTech with Grasim which would not have created a pure play cement company; and
iii. transfer of the cement business to a 100 per cent subsidiary which would not have given Grasim shareholders a direct holding.

Ernst & Young has submitted a report on share entitlement ratio, whilst DSP Merrill Lynch has provided a fairness opinion to the Board of Grasim.

Timing of restructuring and its objectives
Grasim is at an inflexion point. The strategy of using VSF's cash flows to grow cement has succeeded and cement today accounts for over 67 per cent of current Grasim's standalone EBITDA as compared to only 30 per cent in FY04. The Board, therefore, considered that the cement business be restructured in a manner that meets with all of the following objectives viz.

• protect and maximise value to shareholders
• creation of a pure play cement operation,
• opening up new financing options for its growth,
• create platform for potential eventual consolidation,
• provide direct exposure to Grasim's shareholders,
• least possible transaction costs.

Cement Sector opportunities very promising
India is the second largest cement market in the world, even though its per capita consumption is just one-eighth of China. The long term outlook is promising, even though a surplus caused by new cement capacities is likely to put pressure on margins over the immediate term.

Continuing business of Grasim
Grasim is setting up a Greenfield VSF plant at Vilayat, Gujarat for an estimated investment of Rs. 1000 crores The capacity of this plant would be about 80,000 tpa, increasing Grasim's total capacity by about 25 per cent. Commercial production is expected to commence in FY 13. Most of the requisite permissions for the plant have been received. This will reinforce Grasim's position as a world leader in VSF.

Grasim will continue to invest in VSF and other businesses, as further opportunities unfold.

Advisors to the restructuring
- DSP Merrill Lynch Limited and Enam Securities Private Limited acted as advisors.
- DSP Merrill Lynch Limited provided a fairness opinion to the Board of Grasim.
- Amarchand & Mangaldas and Suresh A. Shroff & Company acted as Legal Advisors.
- Ernst & Young Private Limited submitted a report on the share entitlement ratio.

The proposed Scheme of Arrangement will be subject to the approvals of the High Court of Judicature at Madhya Pradesh, Indore Bench and the High Court of Gujarat at Ahmedabad. The restructuring will further be subject to various statutory approvals, including those from the shareholders and the lenders / creditors.

Grasim Industries Limited


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