According to newspaper reports, Gujarat Ambuja has decided to pick up the remainder 7.2% stake held by the Tata group in Associated Cement Companies at a price of Rs 370 per share. The ACC stock is currently trading at Rs 140 per share.
GACL is the largest manufacturer of cement in Gujarat and Punjab. It is India's most efficient cement manufacturer due to high degree of mechanisation in its products and mining activities. It has controlled freight costs by moving bulk of its production through the sea route.
The company has also announced plans to restructure the debt of DLF Cements, another company in which it acquired a 42% stake earlier this fiscal year.
Gujarat Ambuja's acquisition of a strategic stake in ACC would give it a national presence that would go a long way in establishing its dominance in the domestic markets. ACC on the other hand would benefit from GACL's experience in running plants at optimal capacity and efficiency levels. Together the companies would command a capacity of 21 million tonnes, by far the largest in the country.
This move is likely to further boost speculation that GACL has infact taken over the management and it should, according to the Takeover Code, make an open offer for an additional 20% stake in the company. In case Sebi were to favour this view point, GACL would have to make an open offer at Rs 370 per share, which is substantially higher than the market price of Rs 140 per share. This could also leave the company grappling for funds to meet the requirements of the takeover code.
The stock has been rated as a 'BUY' mainly on account of its being one of the most cost efficient cement producers in Asia and the improving demand supply position in the domestic cement markets.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407