Reuters Market Eye - At least three brokerages downgrade their ratings on Ambuja Cements Ltd after Holcim Ltd said on Wednesday that it would raise stake in the company in a restructuring of its operations in India.
Bank of America Merrill Lynch cuts the company to "neutral" from "buy", while Religare has cut it to "sell" from "hold" and recommended investors to switch to other large-cap cement companies such as UltraTech Cements Ltd .
"We think upside potential from Ambuja's CY14-EPS recovery may be dulled by potential concerns over treatment of minority shareholders vis-a-vis its controlling shareholder - Holcim," said BofA Merrill in a report.
BofA Merrill points out that restructuring announced on Wednesday likely leaves Ambuja's minority shareholders with flat-to-tad lower post-deal earnings, while Holcim gets 35 billion rupees in cash and lifts stake in Ambuja to 61.4 percent.
Religare says the acquisition will put Ambuja's minority shareholders at risk as they would now be stakeholders in a "less-efficient" company that is ACC Ltd.
Under the deal, Ambuja will pay 35 billion rupees to buy a 24 percent stake in Holcim India, the Swiss cement maker's local holding company, and then Holcim India will be merged into Ambuja through a share swap.
(Reporting by Abhishek Vishnoi)