Holcim, through its complex rejig deal, has restricted minority shareholders' choice by using Ambuja Cement’s cash for transferring stake in ACC
The multi-layered deal announced by Swiss cement maker Holcim to rejig its Indian operations by way of merger and acquisition between ACC, Ambuja Cement and Holcim India is detrimental to minority shareholder of Ambuja Cement, feels analysts.
Several experts are also slamming the complex deal. In an interview to CNBC-TV18, Anil Singhvi, former managing director and chief executive of Ambuja Cement and chairman of Ican Investment Advisors, has criticised the rejig of Indian operation by Holcim. "The Rs3,500-crore reserve of cash sitting out on the balance sheet of Ambuja has been taken out by paying a premium. This is not a merger, there is no synergy and there is no advantage. In fact, Ambuja will dilute its shareholding by almost 30% and it cannot be earnings per share (EPS) accretive. According to me, this is nothing short of a fraud played out on the minority shareholders in India," he said.
In a research report, Emkay Global Financial Services said, "Prima facie the restructuring is detrimental to minority shareholder of Ambuja Cement as Ambuja Cement will be parting away with its huge cash balance of Rs3,500 crore, which is more than 90% of its CY12 cash on books, without any EPS accretion."
While downgrading Ambuja Cement to 'sell' with a reduced target price of Rs175 (from Rs195) Religare Capital Markets Ltd, in a research note, said, "We believe the acquisition would put Ambuja Cement's minority shareholders at risk as they would now be stakeholders in a less-efficient company, ACC."
As per the rejig plan, Holcim India would be merged with Ambuja Cement. Holcim India then transfers its 50.01% stake in ACC to Ambuja Cement. This would make Ambuja Cement the holding company of ACC. Post the complex merger plan, Holcim (the parent) would hold 61.39% stake in Ambuja Cement while Ambuja Cement would hold 50.01% stake in ACC.
In the first step, Ambuja Cement would acquire 24% stake in Holcim India for Rs3,500 crore cash. Ambuja Cement then would issue its 584 million shares to its parent for the balance 76% stake in Holcim India. Eventually, Holcim India’s 9.8% stake in Ambuja Cement will be cancelled.
According to Motilal Oswal Securities Ltd, the deal is marginally earning per share (EPS) and return on capital employed (RoCE) accretive for Ambuja Cement. "The merger will be EPS/RoCE accretive for shareholders of Ambuja Cement as the company would deploy the idle cash of Rs3,500 crore (earning 6-8% yield), on acquiring ACC’s assets at attractive valuations of about $110 per ton, which is at a steep discount to current market transaction value (recent M&A) and Greenfield capex cost," the brokerage said in a report.
Shares of ACC Ltd and Ambuja Cement fell sharply on Thursday following major restructuring announcement by Holcim, the parent company of both these cement producers. Ambuja was the worst hit as its shares fell over 10.5% to an intra-day low of Rs163.2 narrowly missing its 52-week low of Rs162.5 on the BSE. Ambuja Cement ended the day 10.5% down at Rs171 on the BSE. ACC, on the other hand, hit an intra-day low of Rs1,155. Despite making a recovery later, ACC closed the day 3% down at Rs1,194 on the BSE, while the benchmark Sensex ended 1.42% down At 19,804.7.
Corporate training is appallingly bad in India. Most training programs are taken for granted rather than as an opportunity to impart valuable skills to promising managers.
I am aghast with the poor general awareness in many corporate training or education programs. I am equally scared of such companies being run by incompetent managers. Most of them do not read anything worthwhile; they do not seem to read any business magazine or newspaper. The normal explanation is on the lines of “I have no time to read due to work and family pressures”. Here’s another: “Sir, I tried reading but do not understand anything!”
According to me, both can be overcome, but requires a lot of patience. So, as long as, one can invest time and effort in reading and seeking information that cannot be understood, understanding will come gradually. Many employees risk being labeled “failures”, if they are not up to the mark. Some of them maybe good in their present roles, but when they move up the ladder, they might get exposed if their knowledge is found to be lacking.
I also believe that companies themselves are also responsible for this state of affairs, and employee development and training. They do precious little to make sure that their managers, who going forward will be in line for promotions and will be in decision making positions, are well informed. The inability to understand and comprehend the business environment that is dynamic is a basic problem. Yet, making decisions on perceived notions is a sure shot way of destroying an organization. It is pertinent to note that all this happens in the so-called age of information and knowledge! A good training programme will abolish preconceived notions and enable managers to think logically and rationally by analysing data in a proper way.
Most managers do not even look at their own company’s financial statements and have no idea of the financial performance! If this is the case, how will they possibly analyse markets and competition? How will they possess the required skill to analyse data, not just financial statements?
Shareholders of such companies, with incompetent managers, need to be worried. After all, their money is at stake. Do not get fooled when companies say that they spend so much on training and development. The skill sets of the employees are not known and neither is it known as to what they gain out of such corporate training and programs. Barring few companies like L&T and Hindustan Unilever, whose training programs evoke seriousness, most programs that I have seen indulge in training as a ritual, where employees treat it as though it is a paid holiday and for fun! They rarely treat such programs as an opportunity to upgrade their skill sets.
Stock market analysts should actually interview managers at middle-level to find out the awareness levels. They will have a fair idea of what to expect from companies they cover in future, when managers they interviewed get promoted. Sadly, analysts themselves are not interested in the long term view and the details of what makes companies tick (i.e. the managers and employees). They are busy giving tips for short term trading. They are only interested in the next quarter performance which, according to them, is the long term view! So, most of them do not really know how competent middle-level managers are!
Surprisingly, in corporate education programs you will have managers who have not even heard of Jack Welch or Warren Buffet. They have a vague idea about Porter and they interpret him wrongly most times! They have no idea who AM Naik or YC Deveshwar or Nitin Paranjape is! This is true, even when they are competing with these very companies in the market place.
The tribe of “educated illiterates” in India seems to be ever growing and it’s a big worry. It must be tackled soon. It’s not just the government, politicians and bureaucracy that are responsible for the sorry state of our economic affairs. But, it is we, who largely contribute to the mess in our way!
(Prof Anil Agashe teaches at Symbiosis and other management schools in Pune)
RBI has asked banks not to accept fresh or additional post-dated cheques or EMI cheques at places where ECS facility is available
Reserve Bank of India (RBI) has asked banks not to collect any post-dated cheques for loan repayment as equated monthly instalment (EMI) at places where electronic clearance service (ECS) is available.
In a notification, the central bank said, banks should not accept fresh or additional post-dated cheques (PDC) or EMI cheques at locations where ECS facility is available.
The move is aimed at cutting usage of cheques and promoting electronic transfer. It will also save borrowers the efforts of going to branch for collection of chequebooks.
“The existing cheques in such locations may be converted into ECS by obtaining fresh ECS (Debit) mandates,” it said.
The notification also said that ECS also accords the same rights and remedies to the payee against dishonour of electronic funds transfer instructions under insufficiency of funds that are available under Section 138 of the Negotiable Instruments Act, 1881.
“Considering the protection available, there is no need for banks to take additional cheques, if any, from customers in addition to ECS (Debit) mandates,” it said.
Cheques complying with CTS—2010 standard formats shall alone be obtained in locations, where the facility of ECS is not available, it added.