Over the past few weeks, there have been several media reports regarding demerger of the cement business of L&T and the proposal under consideration of L&T's Board of Directors for induction of an investor (Investment Proposal) into the demerged cement business. Some of the reports have implied that the revival of the demerger exercise and Investment Proposal received are in response to the open offer made by Grasim Industries Limited (Grasim).

L&T wishes to clarify that the demerger proposal, as part of the exercise to restructure the cement business, was awaiting identification of a suitable investor. L&T has been in dialogue with several financial investors since September 2001 to secure capital for the growth requirements of the cement business. Following the acquisition of a stake in L&T by Grasim, the potential investors paused to assess the impact of this development and resumed discussions in July 2002. The current Investment Proposal is a result of several rounds of discussions with CDC Capital Partners, the private equity arm of CDC Plc, since July 2002. L&T is fully aware of the legal issues and has been dealing with reputable private equity investors (including CDC) who are also fully aware of these issues.

Both L&T and CDC believe that the demerger of the cement business and subsequent capital infusion into the demerged cement entity will result in significant value creation for L&T's shareholders by:

  - facilitating the growth of the business; and
  - setting a sound benchmark for the valuation of the cement business.