Since Gujarat Ambuja Cements acquired a 14.4 per cent stake in Associated Cement Companies (ACC) in 1999 it has been mooted as a `strategic alliance’, however Mr Anil Singhvi, Executive Director (Finance), Gujarat Ambuja, has recently adopted an unexpected stance, as he discussed the group’s strategy with local reporters who questioned him over this unchanging position and in particular ACC’s vulnerability to a hostile bid by one of the multinationals?
His first response: “Yes. Even Gujarat Ambuja could be vulnerable to a hostile bid. Why not? The Sekhsaria’s holding in the company is only 24 per cent. Our holding of 14.4 per cent is not by design. It so happened that the Tata’s had that stake, and we bought their holding. Nothing more than that.
“If we (were offered) a good price and value for our money in ACC, we would take it and sell. Why not? If somebody pays Rs 1000 a share for Ambuja also, I would sell it. Business is run with passion and not emotion. Most businesses in India are, unfortunately, run with emotion; they are left with just emotion and no business.
Essentially, how would you categorise your stake in ACC — just an investment? “It is not just an investment. We work together. It is a good business to be involved in. Our presence as a mature shareholder helps both the companies”.
Would you raise your stake in ACC? “When we bought the stake, our idea was that there should be coordination with each other. The purpose was to work together for the larger benefit of shareholders of both the companies. That proposition is as valid today as it was in December 1999. Nothing has changed.
You have an exit clause in the shareholders agreement with institutional investors which have invested in Ambuja Cement India. When does it get triggered and how do you propose to provide the exit route? “We have private equity investors who have invested out of a 12-year fund. When they invest in unlisted companies, there is a condition that the stock would be listed within a specified period. If it is not, and they want to exit, the mechanism is also specified. We have fixed that period as five years, during which our intention is to get listed. If it is not listed during this period and they decide to sell, then we will buy”.
What are your plans for growth through acquisitions, apart from sewing up your control over ACC? Would you go for newer capacities? First, I wish to clarify that we do not wish to have any control or feeling that we have control over ACC. We have good cash flows. We have no capex to put up new units, greenfield or brownfield. Growth will be through acquisitions. Whatever free cash flows we have, we will deploy to grow our business.”
Would your acquisition strategy now be focussed on bigger units? Or would you be interested in even one-million-tonne capacities as in the past? “No. We would be interested in units with capacity of one-three million tonnes. The cement industry is growing in the northern, western and, to an extent, the eastern regions. We are keen on the northern and western regions, and they would be the primary markets for acquisitions.”
What is your take on the trends in cement prices? “Even as several commodities have been on an major upswing over the past 12-18 months at the global level, cement did not participate. Over the past six months, however, there has been an upward trend in cement prices, too. Our export prices, which used to be US$23-24 a tonne, have risen to US$40. Now, cement is also getting into a major upswing in the commodity cycle; it may probably sustain longer due to the China effect. This is important as India would emerge as a major player in exports. Global trade in cement/clinker last year was about 60Mt and India accounts for 10Mt.”