Gujarat Ambuja not to exit Ambuja Cement

Gujarat Ambuja Cements Ltd will not exit from Ambuja Cement India Ltd, its 67:33 joint venture with Holcim of Switzerland which has announced that it will raise its stake in Associated Cement Companies Ltd from 13.8 per cent to 50.1 per cent through an open offer.

There has been such a speculation in the markets after it came to light that Gujarat Ambuja Cements Ltd can exercise the put option as early as June 2005, while Holcim has the right to use the call option after January 1, 2008.

"Such arrangements are necessary in closely-held unlisted companies. Otherwise, how does a shareholder exit if the venture is not working out," Gujarat Ambuja Cements Ltd chairman Suresh Neotia said, adding: "Hopefully, it will not be exercised by any party. If things go well and the company grows, the option will not be exercised at all."

He also said that if the Gujarat Ambuja Group wanted to liquidate its investment in ACC, it would have sold the shares directly to Holcim.

"That would have made Gujarat Ambuja Cements Ltd a debt free company and would have also put some cash in the bank. But we haven't chosen to do so because we intend to stay in the company," Neotia added.

When asked why the Gujarat Ambuja Group had brought in Holcim to complete the acquisition of ACC, Neotia said this was because the Group did not have the financial wherewithal to do it on its own.

Neotia also said the acquisition will not impact the top management of the company. Tarun Das will continue to serve as the chairman of ACC.

"Holcim has told us, in writing, that it would like Das to remain the chairman of ACC even after the acquisition has been completed," Neotia told Business Standard.

Das, the former director general of the Confederation of Indian Industry and now the lobby group's chief mentor, had taken over as the chairman of ACC a few years ago as a nominee of the board of directors.

Neotia also said that none of the whole-time directors of ACC would be changed once the acquisition has been completed, though Holcim might nominate one or two directors on the board.

The staying put option

• Gujarat Ambuja Cements Ltd can exercise put option as early as June 2005, while Holcim has the right to use the call option after January 1, 2008.
• If things go well, the option will not be exercised, Gujarat Ambuja Cements chairman Suresh Neotia said
• Holcim would like Das to remain chairman of ACC even after the acquisition