Professional Documents
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Cement Business
Determinants of Value
Return
Growth
Cash Flow
Capital
Risk
Company Value
Cost of Capital
Managerial
Dimension
Redeploy capital
Increase ROI
Improve management
Replace inefficient one
Risk
Dimension
Cost of capital
reduction
Value
Creation
Market
Valuation
Release Value
Operational
Dimension
Scale Economics
Improve margins
De-merger
Placing Value in the
Shareholders Hands
De-merger Concept
Shareholders
Shareholders
Company
Company AB
AB
Shares
De-merge
Company
Company B
B
Business A Business B
Business
B
Post De-merger
Shareholders
Shareholders
Shares
Company AB
Business
Business AA
Company
Company B
B
Apple
124.4
124.4
165.6
TOTAL
71.1
71.1
Aptech
94.5
94.5
Apple(Finance
)
Per
Share
Cost
Total
(Rs/Cr
)
10.05
306.6
776
5.65
166.5
234
15.7
1010
Banks/
FIs/
Insuranc
e
26.53% Grasim
14.15%
Mutual
Funds /
UTI
11.98% Indian
Public
31.68%
FIIs
6.35%
0.75%
Private
Corporat
e Bodies
18.08% Others
NRIs
4.63%
Response of L&T
Management
Possible Synergies:
Grasim & L&T Combine
Valuation Methodologies
Real Options
Relative Valuation
Market Multiple
Approach
Relative Valuation
Market Multiple
Approach
Relative Valuation
Market Multiple
Approach
Premium paid
Relative Valuation
Market Multiple
Approach
What has
happened ?
Three-Step Process
Demerger ratio
Sale @ Rs 120
Grasim 14.86%
Samrudhi 0.87%
Others
84.27%
Shareholders of L&T
Shares
2:5*
Restructuring
1:2
De-merged
Company
L&T Limited
Assets & Liabilities
Pre-open offer
Grasim 12.6%
L&T
20%
Others 67.4%
*2 equity shares of
Rs 10 each for every
5 shares of Rs 10
each in L&T
Grasim 51.1%
L&T
11.5%
Others 37.4%
Open Offer
Buyer
Seller
Cost
Grasim
L&T
8.5
362 cr
Grasim
Others
30
1278 cr
Total
38.5 1640
Net Outflow
%
share
Per
Total
Share
(Rs/Cr)
Cost
10.05
307
776
5.65
167
234
8.5
171
362
30
171
1,278
15.7
120
Net Outflow
(468)
2,182