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    Backstory: The India Cements-Raasi takeover battle of the '90s

    Backstory: The India Cements-Raasi takeover battle of the '90s

    Backstory: The India Cements-Raasi takeover battle of the '90s
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    By Sundeep Khanna   IST (Published)

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    It was in March 1998, at a price of Rs 286, Raasi founder BV Raju agreed to transfer his shareholding, giving India Cements a controlling 52 percent stake in his company.

    In 1997 Raasi Cements was a small, low-cost producer of cement, with cash flow problems. Given its relative size, it was potentially an acquisition target in a period marked by feverish mergers and acquisition activity in the Indian cement industry. Among those most active was the Southern giant India Cements Ltd. (ICL).
    Not surprisingly, before any other company could get a sniff of Raasi, ICL under N Srinivasan appeared at its doors with an offer of Rs 300 per share. ICL was in the process of consolidating its leadership position in the growing Southern market against competition from companies like Gujarat Ambuja and Grasim. While Raasi wasn’t competition for ICL, it would often dump the cement in the market which would put cost pressure on larger players like ICL.
    ICL's offer was generous, but Raasi founder BV Raju, who had a 32 percent stake in the company he had set up in 1978, was not impressed and held out. But unknown to him, two years ago one of his three sons-in-law, NKP Raju had already sold his 4 percent stake to Srinivasan. ICL also kept buying more shares in the market such that by early 1998 it had nearly 18 percent stake in the target company. In February that year, Srinivasan made an open offer for another 20 percent share of Raasi at an unbeatable price of Rs 300 per share, almost 70 percent above the Rs 174 at which the stock was then trading. Very few shareholders could turn down the bonanza. ICL picked up the 2.13 percent stake held by the state-owned Andhra Pradesh Industrial Development Corporation (APIDC) as well as another 1.40 percent from a local stockbroker. At that price, a counteroffer from Raju also looked difficult unless he could find a white knight. That wasn't happening.
    In the meantime, Srinivasan was also active in the financial circles in Mumbai where he impressed upon the institutions with positions in Raasi, how the acquisition was value accretive for the investors. He was only partially successful since Unit Trust of India which had a 10 percent stake in Raasi refused to sell.
    Sensing this, Srinivasan kept a line of communication open with Raju while also ensuring complete compliance with the new takeover code.
    Finally, in March 1998, at a price of Rs 286, Raju agreed to transfer his shareholding, giving India Cements a controlling 52 percent stake in his company. For Raju and the other shareholders it was a massive premium on the Rs 160 price that the share was trading at by the time the takeover battle had reached its culmination. The acquisition made India Cements the second-largest cement company in the country, after ACC.
    With his share from the sale, Raju went on to set up the Sri Vishnu Educational Society and the BV Raju Institute of Technology with campuses across the state.
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