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Journalism of Courage
Ambuja Cements Ltd plunged the most in about five years as several brokerages cut ratings for the stock after parent Holcim asked the Indian company to pay Rs 3,500 crore to buy its stake in a subsidiary.
The shares plunged 10.52 per cent,the sharpest drop since 2008,to Rs 171. The stock sank 15 per cent intraday,the most in 21 years. Ambuja will buy Holcims 50.01 per cent stake in ACC by paying Rs 3,500 crore to the Swiss multinational. ACC tumbled 3 per cent to Rs 1,194.10.
Brokerages Bank of America Corp and Religare Capital Markets cut their recommendation on Ambuja,saying the transaction wont benefit minority shareholders.
Ambuja Cements will be parting away with its huge cash balance without any earnings per share accretion, Emkay Global Financial Services said in a report. It said the deal dilutes standards of corporate governance that could further impact its valuation.
Ambuja will first acquire from Holderind Investments Ltd,Mauritius,a 24 per cent stake in Holcim India for a cash consideration of Rs 3,500 crore,followed by a merger of Holcim India into Ambuja.
Centrum Broking said the shareholders of two companies will reap no benefit from this scheme of amalgamation in the near-term. This amalgamation is extremely negative for Ambuja as it will have to shell out Rs 3,500 cash, it said. On the managements claim that the deal would accrue Rs 900 crore synergy benefit,it said,We believe that post Holcim acquiring management control in 2006,most of the synergies between the companies have already been achieved in terms of procurement of raw material,coal,packaging materials,stores and spares,etc.
According to ICICI Direct,restructuring of operations would not go well for shareholders of Ambuja. This is because it involves transfer of nearly all the cash on the books of Ambuja Cements to the parent Holcim and issuance of shares to the promoter Holcim for merger of Holcim India,which has a 50 per cent stake in ACC, it said.
