L&T reduces capital, share face value

Accordingly, L&T will issue to the shareholders (including the custodian, on behalf of the GDR holders), one equity share of the face value of Rs 2 fully paid-up for every two equity shares of the face value of Rs 10 each fully paid-up.

This will see a substantial reduction in equity for L&T, which market watchers say, is in line with the fact that engineering companies typically do not have a high equity capital.

Company officials said that the whole process ensured that L&T’s market capitalisation does not get affected.

L&T chairman and managing director AM Naik, said in a message to shareholders, “With the demerger of the cement business the capital of your company is being restructured, reflecting the capital employed in the remaining engineering business. The reduction and consolidation of the shares with the face value of Rs 2 per share, while retaining the true net worth of the shares, will also contribute to the improvement in the valuation of the shares in the marketplace.”

In a notice to shareholders, L&T has said that in two separate orders dated December 12, 2003 and December 18, 2003, the Bombay High Court has directed that separate meetings be convened and held of the equity shareholders, secured creditors (including debenture holders) and unsecured creditors (including fixed deposit holders) of L&T to approve the scheme of arrangement between L&T and UltraTech CemCo and their respective shareholders and Grasim Industries as a shareholder of L&T and L&T Employees Welfare Foundation.

After a protracted battle with the AV Birla Group, L&T decided to demerge its cement business into a new company CemCo in June last year.

As per the agreement, L&T will hold 20 per cent of equity of CemCo, with the balance equity being distributed to its shareholders in proportion to their holdings in L&T. Investors holding GDRs in L&T will be entitled to proportionate GDRs in CemCo.