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Saturday, Jan 24, 2004

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Revival scheme for ACRL merger with Guj Ambuja cleared

Richa Mishra

New Delhi , Jan. 23

THE Board for Industrial and Financial Reconstruction (BIFR) has sanctioned a rehabilitation scheme for Ambuja Cement Rajasthan Ltd (ACRL) envisaging merger of the ailing company with Gujarat Ambuja Cements Ltd (GACL).

As per the scheme, the shareholders of ACRL will get one fully paid up equity share of GACL in exchange of every 50 fully paid up equity shares held in ACRL.

The company has informed the Bombay Stock Exchange of this. It said that it has made an application to the BIFR for seeking certain clarifications for some amendments in the sanctioned scheme. The revival scheme shall be implemented on receipt of the said amendments.

As per the revival proposal, the cut-off date for the scheme is June 30, 2002. The transfer date/merger date is envisaged as February 1, 2004. The salient features include employees of ACRL to be taken over by GACL on terms as detailed in the draft scheme of amalgamation. The cement unit of ACRL to function as a division of GACL and entire assets and liabilities of ACRL to vest with GACL, as per the terms and conditions laid down.

ACRL commenced commercial production in 1997-98, which coincided with the downturn in the cement industry, the BIFR Bench noted. The project was completed in 1997 with a huge time and cost overrun. Taking note of the reasons for sickness, the Bench observed that ``the non-availability of infrastructure facilities such as railway siding, good roads and erratic power supply added to the existing bottlenecks.'' The company had to incur extra expenditure in transportation of cement due to the large surpluses within 200 km radius of the company's cement plant, which was not envisaged originally. The price rationalisation of the company was lower due to severe competition in the cement sector. Besides, the input cost of power, coal and other raw materials was also higher than estimated during the appraisal of the project. One of the major causes of sickness was the high interest rate, the bench noted.

More Stories on : Mergers & Acquisitions | Sick Units | Cement

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