Holcim pays Rs 690 cr for 3.7% in GACL

Holcim has bought another 3.7 per cent in Gujarat Ambuja Cement from its Indian promoters for Rs 690 crore. This translates into an enterprise value of $270 per tonne of cement.

The deal price of Rs 138.65 a share is 32 per cent higher than the Rs 105 a share "" including a non-compete fee "" that Holcim paid in January to buy a 14.8 per cent stake in Gujarat Ambuja from its founders, the Sekhsaria and Neotia families.

A subsequent offer by Holcim to buy 20 per cent from minority shareholders received poor response, given the strong outlook for cement stocks in a booming construction industry.

With today's acquisition, Holcim's stake in Gujarat Ambuja goes up to 18.67 per cent. The deal is part of the open offer agreement between the two. The Indian promoters' stake is now reduced to 5.28 per cent from 8.98 per cent on September 30.

The outlook for the cement industry in the country in the last two years had undergone significant changes, said J Radhakrishnan, research analyst, India Infoline. With an infrastructure boom and cement companies clocking high profit margins, foreign firms were not hesitating to making huge investments, he said.

"Higher enterprise valuation is not dependent on the assets of a company. Rather, it is based on its earning expectations and feasibility," added Radhakrishnan.

Over the past year, cement prices across the country have gone up by 35-60 per cent.

Moreover, during this monsoon, cement prices remained firm, sending strong signals that the industry is in top gear.

When Holcim picked up a stake in Associated Cement Companies in January 2005, the deal translated into an enterprise value of $100 per tonne. When Heidelberg took a 51 per cent stake in Mysore Cement earlier this year, the enterprise value grew to $117 per tonne.

With 10 per cent growth in the country's cement consumption, which industry experts said would only go up, cement companies have announced fresh capacities of 75 million tonnes by 2009-10. This will put the total capacity at 235 million tonnes.

The Holcim-Associated Cement Companies-Gujarat Ambuja combine has a capacity of 33.4 million tonnes, followed by the Aditya Birla group at 31 million tonnes. However, company sources deny the possibility of any merger with Associated Cement Companies.

The Gujarat Ambuja stock started the day on a strong note and moved up by 1.20 per cent, touching an intra-day high of Rs 141.50 on the Bombay Stock Exchange. The scrip closed the day at Rs 138.90 per share, up Rs 1.65.