Holcim Group has started strengthening its stake in its Indian subsidiary ACC through further small-scale share purchases for the first time since September 2008. Ambuja Cement India and three other Holcim entities have raised their stake in the company by 2.01% to 48.21% through open market transactions between December 10 and 24, ACC said in a notice to stock exchanges on Monday.
These purchases seems to be part of creeping acquisition that allows promoters to increase their stake in a company by up to 5% in a financial year without making of an open offer, analysts said. Promoters can do this as long as their total holding is below 75%.
The possibility of a merger of Holcim’s Indian subsidiaries , ACC and Ambuja Cements, has been a talking point among industry players for a long time. According to analysts, the merger may be part of a long-term plan though the timing is hard to guess.
“This could be a precursor to the merger that has been talked about for a long time but it’s difficult to put a timeline since there are a number of issues such as taxation and synergy,” says Jaspreet Singh Arora, an analyst at Angel Broking.
Analysts agree that it does not make sense for Holcim to have two large competing subsidiaries in India. The two companies have already combined certain function such as operations and engineering and share a raw materials procurement set-up.
But an ACC-Ambuja merger is unlikely to be a jig-saw fit. The biggest problem is that both companies are present in most regions and vigorously compete with each other, with the exception of southern India where Ambuja has a limited presence.
“From a manufacturing point of view there is not much synergy as there is the question of what to do in markets where both are present. Both brands are very strong so it doesn’t make sense for the company to eliminate either,” says a UK-based analyst