Dec 14, 1999|
Guj Ambuja may buyout promoter's stake in DLF
According to newspaper reports, Gujarat Ambuja is in talks with the promoters of DLF Cement to buyout the latter's 42% stake in the company. If the deal goes through, Gujarat Ambuja would get control of a cement capacity of 1.4 million tonnes.
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.
Earlier, the promoters of DLF Cements had approached the financial institutions (FIs) for permission to sell off their 42% stake in the company to French cement major, Lafarge. The deal has apparently fallen through due to the delay in execution. Reports also mention that while Gujarat Ambuja has offered a price of Rs 10 per share for the stake, the offer by Lafarge was lower.
The decision to acquire DLF Cements bodes well for the company in view of the decision taken by the various state governments to do away with sales tax exemptions (accorded to new projects) in the near future. The other factors in favour of the deal are a reasonable price, good location (north) and an opportunity to capitalise on the strong demand. Moreover, this acquisition will help the company achieve its stated objective of doubling its capacity in the coming five years.
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.
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