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Holcim buys 11% more in ACIL at Rs 589 cr

28 Apr 2:00am
Posted by fingad
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Holcim buys 11% more in ACIL at Rs 589 cr - by sanjAU_G

Swiss  cement giant Holcim has decided to take complete control of Ambuja Cements India (ACIL), the local company through which it controls ACC, India’s largest cement major. Holcim will buy 11% from Ambuja Cement (ACL), formerly Gujarat Ambuja, for Rs 588.91 crore.

Ambuja Cement, which created ACIL in 2000 and offered stakes to the Government of Singapore and American International Group  in what was then the country’s largest private equity transaction, will now completely exit the company.

Ambuja had signed an agreement with Holcim in 2005 to sell its entire 33% stake in ACIL by 2008. The firm had begun the sale process in February 2007 by selling 11% for Rs 526.5 crore.

The move will enable Holcim to own 100% of an entity that owns stakes in two of India’s largest cement players. ACIL controls 42.88% in ACC, India’s largest cement maker with a 13% market share. Last year, it posted net sales of Rs 7,007.17 crore and a net profit of Rs 1,438.59 crore.

ACIL also owns 9.9% in Ambuja Cement, the third-biggest cement-maker with a 10% market share. Holcim directly owns 36% in Ambuja Cement.

Ever since French giant Lafarge bought Tata Steel’s cement plant in 1998, India’s growing cement industry — currently world’s second-largest — has long attracted global cement giants. Since then, both Lafarge and Holcim have expanded their presence here, with the aggressive Holcim garnering a large chunk of the market.

Surging demand and prices had turned local cement companies into stock market darlings till last year, until the government instituted a differential duty structure to bring down prices. of late, government efforts have become more intense, with rise in cement prices contributing significantly to headline inflation numbers.

However, there could be another significant reason behind Holcim’s transaction. The Swiss giant runs two companies in India — ACC and Ambuja Cement — but does not own a majority stake in either. By untangling some of the crossholdings, Holcim could be preparing the way for a bigger consolidation between the two companies.

Ambuja Cement was set up by the Narottam Sekhsaria and Suresh Neotia families as Gujarat Ambuja in the mid-80s. It quickly became one of India’s most profitable cement companies. In 1999, Ambuja stunned corporate India by buying the Tata Group’s 14% stake in ACC. The audacious move clearly signalled the company’s ambition in dominating the cement market.

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