As analysts slammed the convoluted way the Swiss-based Holcim Group has chosen to consolidate its holdings in cement major ACC through Ambuja Cements Ltd, shares of both the companies wilted under selling pressure as the markets opened this morning.
While the general consensus appeared to be that the minority shareholders in Ambuja Cements have been short-changed because of over-valuation of ACC, the sharpest criticism of the reorganisation formula came from Anil Singhvi, former MD & CEO of Ambuja Cements, who is now the Chairman of Ican Investment Advisors.
In media interactions, he dubbed the deal as “definitely not good for minority shareholders’’ of Ambuja Cements.
His reasoning was that Ambuja Cements was shelling out about Rs 15,000 crore for 50 per cent stake in ACC which was valued at Rs 23,000 crore. At 50 per cent, this should be worth Rs 11,500 crore. But ACL would be shelling out Rs 3,500 crore more and he found it strange at this hefty payout when both were under Holcim management.
His contention was that if there had been a simple merger of both ACC and ACL, Holcim would not get the Rs 3,500 crore in cash which was probably at the heart of the whole exercise.
As the market opened, both the shares crashed but recovered a little later. Ambuja Cements , which narrowly missed breaching its 52-week low of Rs 162.25 when it touched a low of Rs 162.55 on the NSE today, recovered to Rs 176.65, a loss of Rs 14.55 or 7.61 per cent. The volume within the first ten minutes touched 38.55 lakh shares.
ACC was down by Rs 31.70 to Rs 1,198.85 on the NSE and this stock also pulled back from a low of Rs 1,166.45. This counter registered a trading volume of 1.22 lakh shares.
In a related development, Ambuja Cements board has approved the establishment of 2.17 MTPA greenfield clinkerisation project at Marwar Mundwa in Rajasthan and three clinker grinding units of 1.5 MTPA capacity each at Marwar Mundwa, Dadri (phase II), Uttar Pradesh and Osara, Madhya Pradesh at an approximate cost of Rs 3,500 crore.