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NCRDS

STERLING INSTITUTE OF MANAGEMENT STUDIES


Master of Management Studies (MMS)

SUBJECT: - MERGERS AND ACQUISITIONs & cr
TOPIC: - Takeover of raasi cements by india cements

SUBMITTED BY: - Kiran Sawant - 60
Vikas Mahajan -50
S.Y.MMS (FINANCE)

1998 Takeover Of RAASI CEMENT By INDIA CEMENT
RAASI CEMENT
Raasi cement promoted by B.V.Raju and N P K Raju in
1978.
Main Industry is located in Hyderabad.
Raasi owned 39.5% stake on sri Vishnu cement Ltd.
(SVCL)
Raasi had a Bailout Takeover on SVCL and Raasi is
nurturing SVCL.
Raasi's cement division had a capacity of 1.60 mtpa and it
is a low cost cement producer.
Other than cement, the group also had interests in
ceramics and paper
B.V.Raju vice chairman of Raasi cement.
India cement limited
Indian Cement Ltd., was one of the largest cement producers in south
India. Established in 1946 in Tamilnadu.
Cement constituted approximately 97% of ICL's total revenues.
The process of acquisitions triggered off and started with taking over
of Visaka Cement and CCI's plant at Yerraguntla, (Andhra Pradesh)
and Grasim taking over Dharani Cement and Shri Digvijay Cements...
In early 1998, ICL had six cement plants, three each in Tamil Nadu
and Andhra Pradesh.
ICL entered Andhra Pradesh by acquiring the Chilamakur plant from
Coromandel Fertilizers in 1990.
N.srinivasan vice chairman of ICL
SWOT Analysis Raasi cement
Strength :
Low cost Producer.
Having 39.5% share of
SVCL.
Opportunities :
Growth in housing sector -
key demand driver
Weakness :
Weak marketing Set-up.
NO sons, only sons-in-law.
one of them may sell share
to others.
Threats :
Close to a weak colleague
always dangerous.
Government intervention to
adjust cement prices.
SWOT Analysis Indian cement Ltd.
Strength :
One of the largest cement producers
in south India.
Cement demand has grown
tremendously on par with strong
economic growth
Opportunities :
Demand and supply Gap - Additional
capacity of 20 million tons per annum will
be required to match the demand.
Interchangeable use of names of taken
over companies.
39.5% share of SVCL.
Weakness :
Cement Industry is highly
Fragmented.
Low value commodity makes
transportation over long distances -
uneconomical
Threats :
Raw material prices climbing up
Pakistan and north Indian competitors.
Takeover
Takeover is a transaction whereby a person (individual, group of
individuals or company) acquires control over the assets of the company
either:
- directly by becoming the owner of those assets; or
- indirectly by obtaining control of the management of the company

Take Over taking over the control of management.

Takeover bids may be classified as under:

1) Hostile takeover
2) Friendly takeover
3) Bailout takeover




Cont.,
Hostile takeover
The method of trying to take the control of the company without the
knowledge of the existing management is known as Hostile takeover.

Bailout takeover
Taking over of the management of such weak companies for nurturing
them back in normal activities by a company having expertise and
resources is known as Bailout takeover.

Friendly takeover
A friendly corporate body or group of companies may come to the
rescue by buying shares of the company in the open market and/or by
pumping resources to help the management.


Takeover RCL ICL case
Hostile takeover - The method of trying to take the control of the company
without the knowledge of the existing management is known as hostile
takeover.

Tendency of Financial Institutions (FI) to help out Promoters in hostile
takeovers

However, in Raasi Cements Limited (RCL) and India Cements Limited (ICL),
FIs felt cheated.

ICL in its hostile bid for RCL made an open offer for RCL shares at Rs. 300
per share when the share price was at Rs. 100.

Promoters of RCL sold out its 32% stake to ICL in a negotiated deal during
the term of the open offer at price ranging between Rs.200 to
Rs. 286 per share

ICL had full control of RCL without having to purchase single share from the
institutional investors.
TAKEN OVER OF RAASI CEMENT BY INDIA
CEMENT
Earlier,1995 Srinivasan got 4% share(0.68 m),1996 increased to
5%,1997 increased to 8%.
By January 1998, Srinivasan had accumulated 18.03% of Raasi's
equity, both through open market purchases as well as by buying
out the stake of an estranged faction of the Raju family.
In February 1998, Srinivasan announced an open offer to acquire an
additional 20% of Raasi's equity.
He offered Rs. 300 per share, 72.41% above the stock market price
of Rs. 174 on February 26, 1998.

Cont.,
On March 1, 1998, the state-owned APIDC sold its 2.13% stake in Raasi to ICL.
Chennai-based stockbroker, Valampuri & Co., cornered 1.40 % of Raasi's equity
from the market for Srinivasan, taking ICL's stake in Raasi to 21.56%.
If it gets share from V.p. Babaria stake will increase to 28.56 % and it will
become the Vito-power to the company.
After Negotiation ICL team bought Raasi shares for Rs. 286 a share, i.e.,) Rs.
1.49 billion

Vision and mission of ICL
Vision a readiness to cultivate a global mindset, effectiveness,
harnessing of human resources to enhance job and knowledge skills of
employees, a strong accent on R & D and innovation and a move away
from selling, to innovative marketing in recognition of the fact that
the Customer is truly King, are some of the strategies that will help
corporate to survive and succeed.

Mission - We should be one of the largest Cement Companies in the
Country. Our growth in size will be through continuous review of
potentials of the existing manufacturing resources, strategic acquisitions
and expansions . Product quality, consistency and customer service will be
pursued as an act of faith throughout the organization. ICL will
continuously strive to enhance its value to its customers, Shareholders and
Employees.
SWOT ANALYSIS ICL (After takeover)
Strengths :
Increase in capacity (The
addition of Raasi's 2 mtpa and
SVCLs 1mtpa)
Increase in market value.
Opportunities :
Expansion
Demand and supply can be
coup up

Weakness :
Burden of debt.
Have to maintain more
fragmented Acquired Cement
Industries.
Threats :
Raasi had sold 39.5% share of
SVCL to some promoter's
group companies, is
SEBI,BIFR helps to get back ?
Legal Issues made by Raasi
SVCL (sri vishnu cement limited ) which was the subsidiary of
RCL was transferred by Raju to nine of his associates after the
purchase by ICL of Rajus shares in RCL. This was violation of
23 of takeover code which prohibits the target company from
transferring its assets after a public announcement has been
made by the acquirer to make open offers for purchase of
shares from public.

Raju tried to increase his stake more than 90%,so only even
after giving to ICL he can manage to have stack more than
50%.

Post Takeover Synergy
Combined cement capacity of ICL increase up to 8 mtpa.
Operating income of ICL-Raasi combine grew by 55% due to
availability of high cement capacity and steep rise in income.
The company was able to reduce its freight charges and
utilize resources efficiently.
Synergy increase its market share from 15% in 1998 to 25
26% in 1999
Combined synergy To achieve value addition and greater
penetration in southern region.
Combined synergy leads to expansion of plants to enhance
productivity and efficiency to produce nearly 10 million
tones in 2001.

Cont.,
Burden of debt due to acquisition is very high seen from rising
debt equity ratio.
Profitability of the merged firm has gone down from 8% to 4%
in 2001 leads to lack of realization in synergy.
In order to realize the synergy the leverage should be brought
down and cash flow should be generated.
Existing distribution infrastructure of Raasi helps ICL to
leverage this to reduce the freight and other costs.
In oct- 99 Raasi sold 39.5% stake to ICL.


Performance of ICL with Raasi
YEARS NUMBER OF SHAREHOLDERS
1995 16399
1996 17155
1997 18037
1998 22226
1999 33195
2000 37682
2001 39304
2002 44343
2003 51030
2004 45441
2005 49882
2006 48256
2007 117751
2008 (MELTDOWN) 72814
Improvement of Raasi along with ICL
Southern markets have witnessed good demand, tight
supply and firm price trends in 2007 and the demand
outlook for fiscal 2010 also looks promising.
In the period between fiscal 2010 and fiscal 2011,demand
in the region is expected to grow by 13%.
Prices are expected to maintain their upward trend it leads
to some of the larger green field projects come on stream.
In December 99 ICLSL (along with ICL and Raasi)
purchased the remaining shares of SVCL.
conclusion
The whole company currently has a production
capacity of 9.1Mt/year.
ICL with subsidiary Raasi cement is going well, so
the takeover is valuable.
A source said that ICL sells about 90% of its
production in Kerala, Andra pradesh and Tamil Nadu,
all this is due to capacity improved by acquisition of
cement companies like Raasi cements.


Raasi cement promoted by B.V.Raju and N P K Rajuin
1978.
Main Industry is located in Hyderabad.
Raasi owned 39.5% stake on sri Vishnu cement Ltd.(SVCL)
Raasi had a Bailout Takeover on SVCL and Raasi is
nurturing SVCL.
Raasi's cement division had a capacity of 1.60 mtpaand it is
a low cost cement producer.
Other than cement, the group also had interests inceramics
and paper
B.V.Raju vice chairman of Raasi cement.
RAASI CEMENT

India cement limited
Sales Performance in FY 12 -13

Segment Wise Breakup

Geography Wise Breakup

54%
11%
31%
4%
Sales
Consumer Care Foods
International Business Others
21%
17%
36%
22%
Others
4%
Sales
Africa Asia Middle East US Others
Marketing Strategy Process

Strategic
Situation
Analysis
Designing
Market Driven
Strategies
Market Driven
Program
Development
Implementing
and managing
Market
Driven
Strategies

Stage 1: Strategic Situation Analysis
Marketing management uses the information provided by the situation
analysis to guide the design of a new strategy or change an existing
strategy. The situation analysis is conducted on a regular basis after the
strategy is under way to evaluate strategy performance and identify needed
strategy changes.

Stage 2: Designing Market-Driven Strategies
The strategic situation analysis phase of the marketing strategy process
identifies market opportunities, defines market segments, evaluates
competition, and assesses the organizations strengths and weaknesses.
Market sensing information plays a key role in designing marketing
strategy, which includes market targeting and positioning strategies,
building marketing relationships, and developing and introducing new
products.



Stage 3: Market-Driven Program Development
Market targeting and positioning strategies for new and existing products guide
the choice of strategies for the marketing program components. Product,
distribution, price, and promotion strategies are combined to form the positioning
strategy selected for each market target.
The marketing program (mix) strategies implement the positioning strategy. The
objective is to achieve favourable positioning while allocating financial, human,
and production resources to markets, customers, and products as effectively and
efficiently as possible.

Stage 4: Implementing and Managing Market-Driven Strategy
Selecting customers to target and the positioning strategy for each target moves
marketing strategy development to the action stage. This stage considers
designing the marketing organization and implementing and managing the
strategy.

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