Guj Ambuja ropes in AIG, Singapore govt. for funds - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  
  • Home
  • Outlook Arena
  • Mar 22, 2000 - Guj Ambuja ropes in AIG, Singapore govt. for funds

Guj Ambuja ropes in AIG, Singapore govt. for funds

Mar 22, 2000

The Gujarat Ambuja (GACL) and Associated Cement Companies (ACC) takeover saga has taken yet another turn with the company contemplating a move to divest an 80% stake in Ambuja Cement India, which is a holding company for its recent investments. GACL has denied an earlier report that it was planning to offload the stake in ACC to a holding company floated by its managing director. 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 newspaper report has stated that the two investors are AIG and an investment arm of the Singapore government. Both the companies are expected to pick up a 40% stake each in Ambuja Cement. The move, as stated earlier, is aimed at raising funds for the acquisition of the 7.2% stake in ACC that is owned by the Tata group. Also, in case Sebi rules that the company needs to make an open offer for another 20% stake in ACC, GACL would be better prepared to fund it, as it has cash rich investors.

Stepping aside from the issue of takeover or even funding requirements, one needs to take a look (once again) at the aim of the acquisition. GACL, by acquiring the 14.4% stake owned by the Tata group in ACC, will become a key player in the domestic markets with a capacity in excess of 18 million tonnes. Importantly, the GACL will convert itself from a regional to a national player in the cement market (assuming it ultimately leads to a merger). While the first of these factors would ensure that the company’s pricing power would increase dramatically (in areas in which either of the two or both companies are present), the latter would provide a natural hedge in a market that is highly regionalised.

In the long term the two companies make a perfect match. While ACC is inefficient and cash starved, Gujarat Ambuja is considered to be one of the most efficient producers of cement in Asia. On the other hand, ACC’s size outdoes that of GACL by a factor of atleast 1.5 times. Both companies stand to benefit from the other and this is what makes the acquisition logical.

Although an open offer at Rs 370 per share (market price Rs 130 per share) seems steep and overvalued, in the long run the acquisition would go a long way in improving the competitiveness of both the companies. Also, in view of the intensifying competition from multinational companies (so far only Lafarge), the getting together of these two companies seems logical.

Market View:
The fact that GACL is India's most efficient producer of cement has led the analyst to rate the stock as a 'BUY'. The management quality of the company is considered to be another factor in favour of the company.


Equitymaster requests your view! Post a comment on "Guj Ambuja ropes in AIG, Singapore govt. for funds". Click here!

  

More Views on News

AMBUJA CEMENT Announces Quarterly Results (4QFY20); Net Profit Up 7.0% (Quarterly Result Update)

Apr 29, 2020 | Updated on Apr 29, 2020

For the quarter ended March 2020, AMBUJA CEMENT has posted a net profit of Rs 7 bn (up 7.0% YoY). Sales on the other hand came in at Rs 62 bn (down 8.5% YoY). Read on for a complete analysis of AMBUJA CEMENT's quarterly results.

AMBUJA CEMENT Announces Quarterly Results (2QFY20); Net Profit Up 34.6% (Quarterly Result Update)

Oct 23, 2019 | Updated on Oct 23, 2019

For the quarter ended September 2019, AMBUJA CEMENT has posted a net profit of Rs 5 bn (up 34.6% YoY). Sales on the other hand came in at Rs 61 bn (up 1.0% YoY). Read on for a complete analysis of AMBUJA CEMENT's quarterly results.

AMBUJA CEMENT 2017-18 Annual Report Analysis (Annual Result Update)

Apr 8, 2019 | Updated on Apr 8, 2019

Here's an analysis of the annual report of AMBUJA CEMENT for 2017-18. It includes a full income statement, balance sheet and cash flow analysis of AMBUJA CEMENT. Also includes updates on the valuation of AMBUJA CEMENT.

AMBUJA CEMENT 2016-17 Annual Report Analysis (Annual Result Update)

Dec 18, 2018 | Updated on Dec 18, 2018

Here's an analysis of the annual report of AMBUJA CEMENT for 2016-17. It includes a full income statement, balance sheet and cash flow analysis of AMBUJA CEMENT. Also includes updates on the valuation of AMBUJA CEMENT.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

I Recommended this Stock over Page Industries because it's Relevant to Doubling Your Income (Profit Hunter)

Sep 7, 2020

Things are not often what they seem in the market and how you can take advantage of this.

The NASDAQ Whale Could Harm Your Portfolio (Fast Profits Daily)

Sep 7, 2020

The discovery of Softbank pushing up prices on the NASDAQ will cause volatility in the market. Stay alert!

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

AMBUJA CEMENT SHARE PRICE


Sep 18, 2020 11:53 AM

TRACK AMBUJA CEMENT

  • Track your investment in AMBUJA CEMENT with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

AMBUJA CEMENT 5-YR ANALYSIS

COMPARE AMBUJA CEMENT WITH

MARKET STATS