Holcim buys 11% more in Ambuja for Rs 527 cr

Holcim, the world's second largest cement maker, today consolidated its Indian operations by purchasing 11 per cent stake in Ambuja Cement India (ACIL) for Rs 526.5 crore.

With this, Holcim's stake in ACIL increases to 78 per cent, while the remaining 22 per cent is held by Gujarat Ambuja Cement. ACIL holds 35 per cent stake in the country's largest cement firm ACC and 9.93 per cent stake in the fourth largest cement company Gujarat Ambuja Cement.

Gujarat Ambuja said it made a profit of Rs 241 crore from the sale. However, value of ACIL's holding in ACC and Gujarat Ambuja is pegged at Rs 8,100 crore.

Industry sources said today's announcement indicated that Gujarat Ambuja would completely pull out of ACIL very soon.

"The strategy of pulling out of ACIL in phases makes more sense for Gujarat Ambuja as it provides an opportunity to realise more value out of its investments," a source said.

According to the source, Gujarat Ambuja would sell its remaining 22 per cent in two installments before January 2008.

Share prices of Gujarat Ambuja today fell 1.45 per cent to Rs 125.70 on a weak market. In 2005, Holcim entered India by purchasing 67 per cent stake in ACIL - 40 per cent from institutional investors and 27 per cent stake through subscription of a preferential offer - for Rs 3,500 crore.

At that time, it entered into an agreement wherein Gujarat Ambuja had reserved the put (sell) option and Holcim had the call (buy) option for the remaining one-third stake in ACIL.

In 2006, Holcim picked up stake in Gujarat Ambuja.

The consideration for 33 per cent stake in ACIL stood at Rs 1344.76 crore in 2005. It is subject to upward revision in January every year up to January 2008. Holcim reserved the right to call the shares not put by Gujarat Ambuja on or anytime after January 2008.

Global cement makers such as Holcim and HeidelbergCement AG are increasing their presence in Asia's fourth-biggest economy that is experiencing its fastest rate of growth since independence in 1947.

Through its stakes in Gujarat Ambuja and ACC, Holcim controls a fourth of the Indian cement market which has recorded an 8 percent annual growth in the last decade.

HeidelbergCement recently acquired Mysore Cements.

India's gross domestic product expanded at an average 8.6 percent in the past three years, boosting construction of roads, ports, airports and power plants.