Unless Raju's friends can cough up money to make a counter-offer, Srinivasan could well control Raasi.

By R Sridharan

The concrete is cast in the battle for control over the Rs 414.05- crore Raasi Cement (Raasi). Going for the jugular, N. Srinivasan, the CEO of the Rs 832.49-crore India Cements, is on his way to becoming the single-largest private shareholder in Raasi. Says the 53-year-old Chennai-based predator: "We have acquired significant holdings, and I am optimistic about our open offer."

He has every reason to be upbeat. In early March, less than a week after making an open offer to acquire 20 per cent of Raasi's equity, India Cements picked up a 2.13 per cent holding from the Andhra Pradesh Industrial Development Corporation, which was later stalled by the Andhra Pradesh High Court. Then, a Chennai-based stockbroker, Valampuri & Co., cornered 1.40 per cent of Raasi's equity from the market for Srinivasan, taking India Cements' stake in the Hyderabad-based company up to 21.56 per cent. And Srinivasan is also negotiating with V.P. Babaria, a transporter for both India Cements and Raasi, to pick up his 7 per cent stake in the latter.

If Babaria agrees to sell, India Cements' stake in Raasi will go up to 28.56 per cent compared to the 22 per cent stake held by the target company's promoter, the 74-year-old B.V. Raju. The implications are ominous: with more than 25 per cent of Raasi's equity in his kitty, Srinivasan will be in a position to veto any special resolution put up for the approval of Raasi's shareholders. The company, meanwhile, is putting up a brave front. Says R. Kunjithapatham, 65, vice-chairman, Raasi: "Babaria is very much with us. We are confident that he won't sell his stake to India Cements." Counters Srinivasan: "We are negotiating with him, and I am hopeful."

No wonder Raju is hard at work on a defence strategy. One problem: for a counter-offer, Raasi needs Rs 107.64 crore to offer a 10 per cent mark-up on India Cements' Rs 300-per-share deal. But Raasi is severely hamstrung for cash. Despite the net profits of Rs 33.64 crore posted by flagship Raasi Cement, it is crippled by the sagging bottomlines of the Rs 7.89 crore Raasi Ceramics and the Rs 5-crore Telangana Paper Mills, both of which were merged with Raasi on March 31, 1997.

So, Raju has drummed up support from fellow Hyderabad-based industrialists like K.S. Raju of the Rs 959.22-crore Nagarjuna Group and Anji Reddy of the Rs 252-crore Dr Reddy's Labs. Says the 52-year-old Anji Reddy: "Raju has built Raasi with years of effort. We're not going to let an outsider take away the company." Confirms Raasi's Kunjithapatham: "We are finalising the details of a counter-offer."

How will Raju's allies display their support? Will they lend support through their companies? Or personally? Company loans would need shareholders' approval, and it is unlikely that Rs 100-plus crore can be sourced merely from the personal kitties of Raju's friends. Clearly, Raju's counter-offer will have to be effective enough to keep Srinivasan at bay. But the higher the stakes, the harder Raju will have to lean on his allies. Of course, there is no guarantee that Srinivasan will not then raise India Cements' offer.

Strapped for cash and under attack, Raju has sought the help of the courts to buy time. Raasi has questioned the validity of the Securities & Exchange Board of India's (SEBI's) Substantial Acquisition Of Shares & Takeover Regulations, 1997, and the Security Laws (Amendment) Act, 1995, besides the India Cements' offer--a strategy aimed at initiating a prolonged legal battle.

Already, the Andhra Pradesh High Court has directed India Cements' lead merchant banker for the open offer, the Mumbai-based DSP Merrill Lynch, not to proceed further without the approval of SEBI and the Government of India. But India Cements is confident. Says T.V. Swaminathan, 51, general manager (operations), India Cements: "We are appealing against the ruling, and we feel that Raasi's case is not maintainable."

It would appear, in that case, that Srinivasan is ahead in the battle for Raasi. Even as the Unit Trust of India has already decided to sell its 10.51 per cent stake in Raasi to India Cements, two other financial institutions (FIs)--the General Insurance Corporation (stake: 0.47 per cent) and the Industrial Finance Corporation of India (1.84 per cent)--are non-committal and the only one digging in its heels is the Industrial Development Bank of India (5.57 per cent). If Srinivasan breaks the 25-per-cent-barrier, he will be well and truly entrenched inside Raju's (cement) walls.

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