RBS:: ACC Ltd – Holcim raises stake in ACC by 1.1.8%

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ƒ ACC Ltd – Holcim raises stake in ACC by 1.1.8%
ACC Ltd (ACC IN, Rs1075.20, Sell) – Holcim raises stake in ACC by
1.1.8%

Ambuja Cement India Pvt Ltd, a 100% Holcim-owned entity, has purchased 1.18% stake in
ACC at Rs1074.54, raising its stake in ACC to 47.38%. ACC trades at EV/mt valuation of
$138. While, the purchase clearly can be a positive trigger for ACC, our concerns on the
near-term earnings outlook remains.

Holcim raises stake in ACC to 47.38%
Holcim, the parent company of ACC Limited and Ambuja Cement India Ltd, has raised its
stake in ACC Limited by purchasing 2.213mn shares from institutional investors in a bulk
trade reported in the Bombay Stock Exchange at Rs1074.54/share. Holcim held 46.2% stake
in ACC Ltd through its two entitities - Ambuja Cement India Private Ltd and Holderind
Investments. Post this transaction, the equity stake of Holcim in ACC Ltd would rise to
47.38%.

Ambuja Cement India Private Ltd is fully owned by Holcim
Holcim had progressively acquired the stake of Ambuja Cements Ltd in Ambuja Cement
India Private Ltd during 2007 and 2008, and now controls 100% equity stake in its
investment vehicle. As a result, the above transaction has no financial implication to Ambuja
Cements Ltd.

Holcim pays a EV/mt valuation of $138/mt for ACC
Based on our calculations, ACC currently trades at an EV/mt of US$138/mt and Ambuja
Cements Ltd trades at an EV/mt of US$175/mt. So clearly, ACC has been the cheaper of the
two listed Holcim entities in India, which probably one of the reasons for Holcim to raise its
equity stake in ACC. There have been media reports in the past that Holcim would merge its
two entities in India. While, we believe this is logical for Holcim to do, as it would bring about
synergies in various operating aspects.