According to newspaper reports, the Tatas may be considering selling out its 14.41% stake in Associated Cement Companies (ACC), one of India's largest cement companies. The move seems to have been sparked off by a lucrative proposal made by a large multinational.
ACC is India's second largest cement company with a capacity of 11.6 m tonnes per annum. The company commands an 11.5% stake in the Indian cement market.
The Tata Group has been in the restructuring mode over the last couple of years. The Group Chairman, Ratan Tata, has gone on record stating that the Group was looking at exiting non-core activities in order to adopt a more focussed approach. In light of this fact, ACC does make a case for disposal.
The company has been an industry laggard when it comes to adopting new technologies to improve productivity and efficiency. It continues to be saddled with a large workforce although efforts are now being made to retrench employees. Added to this is ACC's reactive attitude as opposed to proactive that has led to its bottomline come under increasing pressure in the recent years.
Being part of a large multinational that has a global presence in the cement industry would benefit ACC in a number of ways. The company would get access to the latest technology. This is crucial given the increasingly intensive competition in this commodity business. ACC would benefit from the global experience of its new parent and this could possibly open up new opportunities in international markets. All in all, AC stands to be a net gainer from this exercise.
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