L&T has roped in JP Morgan and DSP Merrill Lynch as investment bankers for counsel on demerger of its cement business and the exercise is expected to last eight months, Mr Marathe said.

According to him, capital was needed for the cement business from strategic and financial partners which prompted restructuring of the cement business through a demerger route. L&T has invested substantially in cement and would not like to increase it further to ensure a balance in terms of capital commitment to various businesses.

In 1999-2000, the demand for cement grew at 15 per cent and all the factories operated at full capacity with operating margins improved from 1.5 per cent to 15 per cent during the year.

However, the price of cement continues to be depressed. The overall cement capacity of the company is likely to increase to 16 million tonnes by the end of next year from the current level of 14 million tonnes following commissioning of grinding units in West Bengal and Arakkonam in Tamil Nadu.

Mr Marathe said that L&T's operations in 1999-2000 were hit by the slow growth in the capital goods industry mainly due to excess capacities as against slowdown in demands. Despite this, the company booked orders worth Rs 8,146 crore as compared to Rs 7,688 crore in the previous year. The order backlog at the year end at Rs 6,819 crore is higher than Rs 5,870 crore at March 31, 1999, an increase of 16 per cent. L&T has acknowledged that the year-ended March 31, 2000 was one of the most difficult years for the company. Industrial growth for fiscal 2000 at approximately 8 per cent appears to be healthy but is largely influenced by the growth in consumer goods and intermediate products.

Investments in the economy continue to be sluggish which is reflected in the negligible growth in the capital goods sector. Excess capacities in industries such as steel, paper and the slow pace of investment in the energy sector are some of the factors for the lacklustre growth in the capital goods industry. Coupled with this was the fact that the year saw a decline in realisation from the sale of cement although there was considerable volume growth.

L&T's business is largely in these sectors and therefore the performance during 1999-2000 has been impacted due to this unfavourable business circumstances. On this background, the company has performed reasonably well. Sales and service for the year at Rs 7,424 crore show a marginal increase of 2 per cent over the previous year. However, profit before depreciation, interest and taxes for the year at Rs 995 crore reflects a marked improvement over Rs 870 crore in the previous year.

The improved performance at the operating level is the result of several focussed initiatives of cost reduction and productivity improvements. With the commencement of commercial production of cement at the Tadipatri plant in Andhra Pradesh and the captive power plant at Awarpur in Maharashtra. Due to the increased level of investment and working capital, interest cost has gone up substantially from Rs 161 crore to Rs 332 crore. Profit before tax and profit after tax at Rs 382 crore and Rs 342 crore respectively are lower as compared to the previous year.

Major initiatives have been taken for restructuring and strengthening the operations of the infotech subsidiary of the company. These include increasing the marketing network, inducting senior management talent in the organisation, integrating the operations of L&T with the information technology company, using the contacts of L&T for increasing business for the IT company, increasing e-commerce related business, etc.

Shareholders force poll
A section of the minority shareholders led by Mr Dalia forced a poll at the L&T AGM on four routine resolutions. The opposition to these resolutions came as a mark of protest against the company management's alleged failure to add value to shareholder wealth. The resolutions opposed included the adoption of the balance sheet and profit and loss account for the fiscal-ended March 31, 2000 and a revision in the salary and perquisites of whole-time directors. Even the appointment of auditors was opposed on the grounds that the auditors had not done their jobs well.