Our Bureau

Mumbai, Jan 30

A YEAR after it bought into India's largest cement maker, ACC, Swiss major Holcim today announced that it was buying 14.8 per cent stake in Gujarat Ambuja Cements Ltd (GACL) from its founder-promoters, the Sekhsarias and the Neotias, for Rs 2,100 crore (over $470 million) at Rs 105 a share.

20 pc open offer at Rs 90:

Holcim - through subsidiary Holderind Investments Ltd - has also entered into an agreement with the promoters to make an open offer to shareholders for up to 20 per cent stake in the company, at Rs 90 per share. This will work out to $546 million.

Altogether, Holcim is prepared to invest close to $1 billion for nearly 35 per cent stake in GACL.

Holcim's acquisition of 20 crore equity shares from the promoters at Rs 105 a share includes a "non-compete fee" of Rs 15 per share to ensure that the sellers do not pursue the same activity later. The promoters continue to hold nine per cent stake in GACL.

At a valuation of around $200 a tonne of capacity, the Holcim-GACL deal tops all earlier domestic cement buyouts and equals the most expensive worldwide in valuation.

Mr Anil Singhvi, who was appointed Managing Director of GACL today, said: "This is almost twice what Holcim paid for ACC. I would go so far as to say that it is among the most expensive buyouts worldwide in the cement industry. I don't think anyone has yet got 15 million tonnes capacity valued at $3 billion."

According to analysts, the Grasim offer for UltraTech (then L&T Cement) worked out to around $85 a tonne, while Holcim's offer for ACC was slightly over $100.

Mr Singhvi finds the valuation very much in order. "Compared to the operating margins of the earlier two buys, which were in the range of 12-13 per cent, our operating margin is 30 per cent; we are the most cost-efficient in the country."

Post-open offer, Holcim will nominate three directors on the board of GACL. This will be regardless of the response that the open offer might fetch.

Non-executive directors Mr Vinod Kumar Neotia and Mr Harshvardhan Neotia, as well as Wholetime Director Mr Pulkit Sekhsari have resigned as directors.

Mr Narotam Sekhsaria, founder-promoter and Managing Director, is now non-executive Vice-Chairman.

As the single largest promoter in both ACC (capacity of 18 million tonnes) and Gujarat Ambuja (capacity of nearly 15 million tonnes), Holcim will now have control over 33 million tonnes of cement capacity or around 23 per cent of the country's cement manufacturing capacity of 140 million tonnes.

Grasim Industries has control of nearly 32 million tonnes, 15 million tonnes of its own and 17 million tones of UltraTech Cement, in which it has majority stake.

Last year Holcim acquired 67 per cent stake in Ambuja Cements India Ltd (ACIL) in which GACL holds the remaining 33 per cent.

ACIL has over 34 per cent stake in ACC and 94 per cent stake in Ambuja Cement Eastern Ltd.

Analysts said that larger cement conglomerates means greater control over pricing.

Holcim is expected to introduce its systems and technology to GACL, in particular its technologies in use of alternative sources of energy.

There will be no immediate changes in the management of GACL. A statement said: "Holcim has expressed its firm belief in the entrepreneurial and management capabilities of the management team to further strengthen the company's position in the Indian cement sector."

The GACL scrip slid by Rs 1.45 on the BSE today to close at Rs 90.45, lower by 1.58 per cent from the previous close.

But it may be recalled that the scrip has been rising for the last few months, the market having got a whiff of the agreement.

Related Stories:
Ambuja Cement India: A cash cow

(This article was published in the Business Line print edition dated January 31, 2006)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.