The boards of both the companies will meet in Mumbai on September 21 to consider plans to restructure their cement businesses into a single division within Grasim. Indian Rayon will demerge its cement businesses to Grasim. Grasim, in turn, would issue shares or global depository receipts (GDR) to Indian Rayon's shareholders or GDR holders at fair ratio to be determined by the respective boards.

The Bombay Stock Exchange (BSE) was informed about this development by both Grasim and Indian Rayon today. Consequent to the proposed plan, Indian Rayon would focus on building its industry leadership position in viscose filament yarn, spun yarn, insulators and carbon black. At the same time, Grasim will emerge as a leader in two core businesses, viscose staple fibre/textiles and grey and whitecement.

The shareholders of both the companies would benefit from the proposed restructuring, the company said. The restructuring would be subject to various approvals, including those from Indian financial and investment institutions, shareholders, regulatory authorities, lenders, creditors and the courts.

It is expected that the consolidation of the grey and white cement businesses would generate significant synergy gains, which would enhance profitability. Officials of the group did not disclose the value of these assets, or whether the valuation includes the cement brands of Indian Rayon. The board of directors of the two companies will meet on September 21 to ratify the consolidation exercise.

The proposed restructuring will create a leading, national 10.5 mtpa grey and white cement businesses in Grasim, the notice said. Grasim has recently acquired Sri Digvijay Cement and Dharani Cement. With the consolidation, Grasim will have a cement turnover of around Rs 1,800 crore, producing both grey cementand white cement, and presence in another core business - textile and viscose staple fibre (VSF), a textile intermediary. In terms of capacity, Grasim, along with Larsen & Toubro, will be second to Associated Cement Companies (ACC) which has a capacity of 11 million tonne. In white cement, Grasim is already India's largest player.

Indian Rayon, on the other hand, will henceforth focus on three core areas -- viscose filament yarn (VFY), insulators and carbon black. Cement has been Indian Rayon's core business so far and contributed around Rs 800 crore to its Rs 1817-crore turnover.