Gujarat Ambuja Cements (GACL) proposes to merge its ailing subsidiary Ambuja Cement Rajasthan (erstwhile DLF Cement) with itself as part of a rehabilitation scheme submitted to the Board for Industrial & Financial Reconstruction (BIFR).
The GACL board will be meeting on July 15 to discuss the merger issue and take a final call.
Ambuja Rajasthan was acquired by Gujarat Ambuja in December 1999 for Rs 131 crore and has been making losses ever since its inception. With its net worth completely eroded due to continuous losses in the past three years, the company was last year referred to BIFR. It incurred a net loss of Rs 55.09 crore for the year ended June 2001.
When contacted, Anil Singhvi, GACL executive director said that he was not in a position to comment on the merger issue before the board meeting.
Gujarat Ambuja pipped French cement major Lafarge in acquiring DLF Cement, and this enabled it to get a major foothold in north India. Along with ACC, Gujarat Ambuja now has a price determining control over the northern markets.
Around two years back, Gujarat Ambuja increased its stake in the ailing company to 49.1 per cent from 42.2 per cent through a Rs 31 crore preferential allotment, to prevent it falling into the BIFR net.
The 1.4 million tonne cement unit's debt was revamped to reduce its average cost of borrowing to around 11 per cent besides repayment of a part of its total debt of Rs 300 crore. The parent company adopted other methods like setting up a captive power plant and introduce the usage pet coke instead of coal to cut costs.
