ACC fell as prospects of an open offer in the company dissipated after Sebi cleared acquirer Gujarat Ambuja Cements of the management control issue.

In response, the scrip of India's largest cement maker lost 2.40% to Rs 136 by 9:58 IST on Wednesday. It registered volumes of 31,864 ACC shares on BSE by that time. Already, between 28 February and 17 March 2003, the scrip lost 11.66% to Rs 139.35 from Rs 157.75.

In contrast, over the prior month (between 31 January and 28 February 2003), ACC had gained 13.4% from Rs 139.10 on expectation that Gujarat Ambuja would have to make an open offer for an additional 20% stake in ACC.

Securities and Exchange Board of India has cleared Gujarat Ambuja Cements of charges that it violated the Takeover Code while acquiring 14.5% stake in ACC from the Tata group. The news proved a boon for the GACL scrip, as it rose 2.75% to Rs 156.95 so far.

Earlier, the Securities Appellate Tribunal ordered Sebi to take a re-look at the deal involving GACL's acquiring a 14.45% stake in ACC. In a statement on 25 October 2002, SAT said that Sebi had jumped to conclusions while stating that the acquisition of stake by GACL in ACC was not tantamount to a change in management control, and, therefore, did not trigger the Takeover Code.

Earlier, Sebi had stated that the Tata group, despite having a 14.45% stake in ACC, did not exercise any control over the company. Therefore, the Tata group's sale of stake to GACL did not result in change in management control. However, a group of ACC shareholders moved SAT against the Sebi ruling.

SAT then asked Sebi to conduct a fresh probe into the deal, saying the market regulator's earlier findings were not complete and adequate. SAT told Sebi to look into whether GACL is in a position to effect control over ACC (to look afresh as to whether the acquisition of 14.45% stake by GACL resulted in change in management control or not). If Sebi had concluded that GACL had, in fact, acquired management control over ACC, GACL would have had to make an open offer at Rs 370 per equity share plus interest for the last three years.

In 1999-2000, GACL had bought the Tata group's entire holding of 14.45% in ACC in three tranches at Rs 370 per share.

The subdued movement in ACC and other cement pivotals also follows reports that cement prices may come under pressure next month, as a new capacity of about 3.5 million tonnes is set to go on stream in the western and southern regions. Sanghi Industries, which operates a clinker unit, is commissioning its cement grinding unit later in phases of 1.3 mt next month and another 1.3 mt two months later. Rajashree Cement, a unit of Grasim, is also in the final stages of hiking its grinding capacity by another 1.1 mt through de-bottlenecking.

Meanwhile, analysts feel that the cement industry should witness stellar growth in volumes in the months to come following the sustained increase in construction activities. The thrust on infrastructure in the Union Budget will also boost cement demand further. The Centre has proposed Rs 60,000 crore in infrastructure projects in the Union Budget. In FY 2002-03, cement demand is expected to increase by a healthy 9.5%. Demand growth is expected to be the highest in the South (about 15%), followed by the North (9%), the West (6%) and the East (4%).

Demand continues to be driven by the Golden Quadrilateral road project and the sustained growth in housing construction activity.

On the price front, analysts feel that these will remain subdued till cement makers do not curtail production. Analysts also expect only a modest performance from cement companies for Q4 ending 31 March 2003. The capacity expansions carried out over the last couple of years by most cement majors has created a supply overhang, thereby putting pressure on cement prices.

For the month of February 2003, the overall sector witnessed a 5.92% rise in dispatches to 9.3 million tonnes. Production rose by 5% to 9.32 million tonnes. For the first eleven months of the fiscal, cement dispatches have risen 8.99% to 100.3 million tonnes on a production increase of 9.14% to 100.47 million tonnes.

In January 2003, ACC announced its third quarter results (ended 31 December 2002). The company posted a 19.4% rise in net profit to Rs 20.21 crore, compared to Rs 16.93 crore in the corresponding period of the previous year. However, net sales declined by 3.06% to Rs 682.28 crore (Rs 6.82 billion) from Rs 703.86 crore (Rs 7.03 billion) in DQ 2001.

BSE code: 500410

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