Holcim is set to sign a licensing agreement with Gujarat Ambuja Cements (GACL), its Indian partner, to retain the corporate name of its majority-owned special purpose vehicle (SPV), Ambuja Cement India (ACIL), which owns 34.7 per cent in the country’s second-largest cement maker, ACC. As part of the licensing agreement, Holcim will also retain the name of ACIL’s subsidiary, Ambuja Cement Eastern (ACEL), as well as the Ambuja brand of cement that the company sells in the eastern region, till such time that GACL remains a shareholder. However, there is one caveat: the Ambuja brand will remain with Ambuja Cement Eastern till such time that Harshvardhan Neotia, the company’s CEO and son of GACL chairman Suresh Neotia, remains at the helm of the Holcim subsidiary.
Holcim’s move to remain wedded to the Ambuja name, instead of opting to build its own brand presence in India, is in line with its global strategy to harp on its joint ventures, even if they are majority-owned, to strengthen its presence in a new market. In Thailand, Holcim has stuck to the corporate name of Siam City Cement, which it acquired in the late ’90s. The thinking is that very few in India, especially cement buyers, will have an idea about Holcim or its brand name.
"Holcim-controlled ACIL will be entering into a licensing agreement with GACL soon to retain the corporate name of ACIL, as well as that of ACEL and the Ambuja brand of cement that it sells, so long as GACL remains a shareholder. With this, we will be taking our partnership another step forward," said GACL executive director Anil Singhvi. However, GACL will not charge any fees from Holcim for using the corporate name of ACIL and ACEL, or the Ambuja brand that the latter sells. "There are no licensing fees involved. After all, we will also gain enormously from the best practices followed by Holcim," Mr Singhvi added.
On its own, Holcim holds 67 per cent stake in ACIL, the SPV that is now a promoter of ACC, with the remaining 33% held by GACL. ACEL, which focuses on the eastern markets, is 95 per cent owned by ACIL. While GACL, as per its agreement with Holcim, has a put option with respect to its 33 per cent shareholding in ACIL, which is valid any time after June 30, ’05, company officials said that they do not see the need for exercising it any time in the near future. The value of the put option, which is backed by a bank guarantee, is pegged at Rs 1,350 crore. Holcim, however, has the right to call the shares on or any time after January 1, 2008.
"So long as it works well and there is no larger conflict, we do not see any reason to exercise the put option. The provision has been made keeping in mind the possibility of any conflicts, in case they arise," Mr Singhvi said. Meanwhile, the boards of ACIL and ACEL have been revamped with the appointment of Holcim nominees. ACEL now has three new Holcim representatives - Paul Hugentobler, Onne Van Der Wander and Ramit Budhraja.
ACIL, on the other hand, has four new Holcim representatives - Mr Hugentobler, Mr Van Der Wander, Dinesh Kothari and Theo Schlatter. Mr Hugentobler, who is a member of Holcim’s executive committee, and Markus Akermann, CEO, member of the board of directors of Holcim, are already on the board of ACC as additional directors.