Gray Cement

Here is how Holcim, Ambuja and ACC have repeatedly short-changed investors. Those making a noise today abetted the previous cases of  malfeasance

Ambuja Cement Limited (ACL) announced a layered deal to amalgamate Holcim (India) Pvt Ltd, with itself under which ACL will acquire a 24% stake in Holcim India by paying it Rs3,500 crore. This will give Holcim an additional 10.85% stake in ACL, while giving away a 19.42% beneficial interest in ACC Ltd. Then, when Holcim and ACL are amalgamated, Ambuja Holdings will end up with a 50.01% stake in ACC.

Anil Singhvi, former chief of ACL, calls this a fraud on minority shareholders, because it amounts to taking out Rs3,500 crore of cash from ACL by paying a premium, while diluting its shareholding by 30%. The Securities & Exchange Board of India (SEBI) has chipped in saying it proposes to examine the deal closely from the minority shareholders’ perspective.
If SEBI does step in, it will be for the first time in two decades of complex manoeuvres involving Gujarat Ambuja, ACC Ltd (once a Tata company), Holcim and their group companies, which invariably gypped minority shareholders. The only difference would be that Anil Singhvi, who used to be a part of those deals, now wears the hat of a good-governance pundit.

In 2000, Gujarat Ambuja Cement acquired a 14.5% stake in the Tata-controlled ACC, with a Rs925-crore, two-stage ‘strategic alliance’ designed to give minority shareholders a raw deal. The shares were acquired at a 150% premium to market price without the mandatory open offer to retail investors, using a loophole in the takeover code. It caused such a furore that takeover regulations were rewritten, but the companies got away with the deal.

Then, in 2005, another complex structuring saw Swiss cement major, Holcim acquire a 67% stake in Ambuja Cement India Ltd (ACIL) and the single largest shareholding in ACC. It was again touted as a ‘strategic alliance’ rather than a sale. Ironically, the transaction was also at Rs370 a share. Anil Singhvi presided over that deal. This was immediately followed by the sale of Everest India Ltd to the Adani group. At that time, I had speculated that the founders Narottam S Sekhsaria and Suresh Kumar Neotia were looking for a way out of management and an amicable separation of businesses. That happened in 2011 with the transfer of a small stake. For minority shareholders, there are three lessons. First, that they get a raw deal from Indian promoters as well as foreign acquirers. Second, multinationals can play a long game with overseas transactions that will never be known to the public, since Indian regulators are easily persuaded not to dig deep. Third, minority shareholders usually end up accepting that they are never co-owners and have to be satisfied with getting less, so long as they still make money; otherwise, they sell and go.

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