Institutional Investors upset with Ambuja-ACC transaction

Institutional investors in Ambuja Cements are miffed with the the company's move to acquire parent Holcim's stake in another group entity, ACC.

Swiss cement maker Holcim, which holds majority stakes in both the Indian firms, will increase its stake in Ambuja to 61.3% from the current 50.01% once Ambuja buys Holcim’s 50.1% stake in ACC. Currently, Holcim owns 50% stakes in Ambuja and ACC.

Fund managers, who own  shares of Ambuja, said they the transaction, which could result in Holcim walking away with Rs 3,500 crore of Ambuja’s cash holding, is detrimental to the interests of minority shareholders. Business Standard spoke to fund managers of five mutual funds on the matter who agreed to speak on condition of anonymity.

“This is a breach of corporate governance norms. Holcim is making Ambuja pay for the deal. This is day-light robbery,” said as equity fund manager of a domestic fund house.

Fund managers did not detail how they plan to oppose the move. While some fund managers said they would look at reducing their exposure to the stock, others said they would look at selling the stock altogether. “Incremental investor interest in the stock might go down. The stock has been down-rated and is not likely to go anywhere from these levels,” said another equity fund manager.

The negative outlook on the stock was evident on Thursday when the stock opened down by 10% at Rs 172. It fell by as much as 13% during the day and is currently trading at Rs 170.70 per share, down 10.7% from its previous close.

Brokerages expect the stock to trade at Rs 160-165 levels, but fund managers said the stock to fall further from those levels.