Institutional shareholders, led by foreign institutional investors (FIIs), may have decided to vote in favour of Holcim?s restructuring plans for Indian subsidiaries ACC and Ambuja Cements, but domestic brokerages continue to see limited upside from the deal.
IDFC Institutional Securities in a note released on Thursday deemed shareholders? approval as negative for Ambuja and said the stock price is likely to fall 10% from current levels due to the cash depletion and equity dilution. ?We have not changed our target price as we await the final clearance. However, eventuality implies a target price of R146, 15% downside from current levels,? IDFC analysts added.
Others agree Ambuja remains expensive even after considering the possible benefits of the merger. ?Even if one takes into consideration the savings from cross-utilisation, Ambuja Cements? current market price makes it expensive,? said Nitin Bhasin, cement analyst, Ambit Capital. The deal was approved by a majority of the minority shareholders after a postal ballot was concluded earlier this week, with 68% of public shareholders voting in favour of the proposed reorganisation.
The voting process saw 87.04% of institutional shareholders cast their vote, but only 10.36% of individual shareholders which include retail participants voted on the deal.
?While we have opposed the restructuring plan, the postal ballot saw one of the highest turnouts by minority shareholders over a corporate decision. Retail shareholders would also show more participation once they are made aware of the e-voting facility,? said Shriram Subramanian, InGovern managing director.
Ever since restructuring was proposed, as many as nine brokerages have downgraded Ambuja, while four brokerages have downgraded ACC. Shares of Ambuja Cements and ACC have fallen 4.51% and 14.71% since the deal was announced. In the current calendar year, Ambuja Cements has lost 13.19%, while ACC has lost 26.55% down.
