Grasim seeks to integrate Cemco into its fold

By Pradeep Rane | 06 Jul 2004

With Grasim successfully completing the open offer for Cemco, the company is now trying to integrate Cemco into its fold.

Grasim had received an overwhelming response to the 30 per cent open offer made for Cemco Limited which closed on June 21, 2004. The cement business of Larsen & Toubro was recently demerged into Ultra Tech Cemco. Grasim is now seeking a smooth transition of the L&T cement brand, which is likely to end by April 2005.

In order to achieve its objective, the company plans to undertake aggressive advertisement spending and direct contact with intermediaries. The Birla group company has earlier shown its ability to successfully integrate entities that were acquired in related businesses, a fact that has already been demonstrated in case of Indal, which was acquired by Hindalco. It is expected that Cemco's profitability would improve on account of full utilisation of assets and synergy gains.

The cement business, now accounting for almost half of Grasim's total revenue, would be a major growth driver going forward for growth in the coming months. According to analysts, Grasim, with its robust cash flows and strong balance sheet, would be able to capitalise on opportunities in the rapidly growing Indian cement industry. Analysts said that Grasim is the most attractive investment in the cement sector on the back of healthy financials and undervaluation compared to its peers. With a 116-million tonne demand, India is the second largest cement market in the world.