Takeover of Raasi Cements by India Cements

Takeover of Raasi Cements by India Cements

In January 1998 there was an unusual press conference at Hyderabad's Hotel Viceroy. Seventy-seven-year-old B.V.Raju, (Raju) vice-chairman of the Hyderabad (India) based Raasi Cements (Raasi) mobilized all his daughters, sons-in-law, and grandchildren in a display of family unity. "We are one united family and will ward off any takeover threats. I am a humble, simple man who has always maintained a low profile. But when it comes to fighting, I shall not be found wanting,1" he declared. Raju's comments came in response to reports that N. Srinivasan2 (Srinivasan), was buying Raasi's share in the market. The Raasi scrip, which hovered around Rs 50 till November 1997, tripled in value to Rs 158 in January 1998. Srinivasan had acquired 18.03% of Raasi shares by January 1998. While he was responding to the takeover reports Raju recalled, "I made an offer to Srinivasan to buy the shares with a 10 per cent profit margin and 20 per cent interest from the date of purchase. Though he told me he had no ulterior motives, it appears as if he is still on a buying spree."3

In January 1998, Business India reported, "Rubbing salt into his wound is the fact that when India Cements was passing through difficult times in 1987-89, the then IDBI chairman, S. S. Nadkarni, had requested Raju to take over the ailing company. But he had refused saying "one should not close in on a weak colleague."

Analysts pointed out that ICL had strategic advantages in taking over Raasi. In 1997, ICL added 2.2 million tonnes per annum (mtpa) new capacity through acquisitions and expansions.⁴ The addition of Raasi's 2 mtpa capacity would make it the undisputed leader in the south of the country. Again, a Raasi takeover meant automatically acquiring 39.5% equity in the 1 mtpa Sri Vishnu Cement Ltd. (SVCL), another Group Company⁵

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1] BusinessIndia, January 26, 1998.
2] In 1989, Srinivasan took over as the managing director of India Cements Ltd. (ICL). Srinivasan made his first acquisition within six months of taking over when he out bid Gujarat Ambuja Cements Ltd. (GACL) and L&T to take over the 1 mtpa Coromandel Fertilizer cement plant (belonging to Coromandel Fertilizers) in Cuddapah (Andhra Pradesh State).
3] Business India, January 26, 1998.
4] ICL acquired Visaka Cements (0.9 mtpa) for Rs 380 crore and Cement Corporation of India's (CCI's) Yerraguntla plant (0.4 mtpa) for Rs198 crore. Both these plants were in Andhra Pradesh. Also ICL's greenfield plant (0.9 mtpa) at Dalavoi in Tamil Nadu went on stream.
5] SVCL was promoted in 1985 by Raju and the Andhra Pradesh Industrial Development Corporation (APIDC). It became a sick unit in 1990. A rehabilitation package was worked out by the Board for Industrial and Financial Reconstruction (BIFR) in 1995, under which Raasi was permitted to bring in nearly Rs 5 crore as share capital. At that time it was stated that the shares allotted to the promoters would be locked in for a period of three years from the date of allotment. To that effect, the promoters had also given non-disposal undertakings to the Financial Institutions. With this share allotment, Raasi held 39.5% in the equity capital of SVCL.