India's Grasim may absorb UltraTech unit - report

MUMBAI, June 25 (Reuters) - India's Grasim Industries (GRAS.BO) plans to absorb its unit UltraTech Cement (ULTC.BO), to consolidate the group's cement business under one arm, the Economic Times reported on Thursday, citing an investment banker.

The move will create India's top cement firm, with a combined production capacity of 42 million tonnes a year, overtaking ACC Ltd (ACC.BO) controlled by Switzerland's Holcim (HOLN.VX) that will have 30 million tonnes by 2010.

Diversified Aditya Birla Group, which runs Grasim and UltraTech, is looking at consolidating the cement business after engineering conglomerate Larsen & Toubro (LART.BO) sold its minority holding in UltraTech, the newspaper said.

"Following L&T's exit the Birlas are putting the consolidation initiative on the fast track. They will shortly bring the two companies under one roof," it quoted an unnamed banker as saying.

L&T sold its entire 11.5 percent stake in UltraTech to a clutch of investors earlier this month. [ID:nBOM481845]

The paper cited a person close to the group as saying the merger would face no hurdle as Grasim already owned a majority in UltraTech. Grasim owns 50.7 percent of UltraTech, according to stock exchange filings.

The paper said a Aditya Birla spokesperson declined comment and described it as market speculation.

Grasim officials could not be immediately reached for comment. (Reporting by Narayanan Somasundaram; Editing by Ranjit Gangadharan)