Ambuja Cements raises Rs5,000 crore from Adani family office

The allotment of warrants in Ambuja Cements to the Adani family office is finally through. On Tuesday, the board of Ambuja Cements secured approval from the Finance Committee of Directors authorizing the allotment of warrants worth Rs5,000 crore. This allotment will be made to Harmonia Trade and Investment, an Adani group firm. The placement will be done on a preferential issue basis. With the open offer not going through successfully, the Adani group had little choice but to rely on the preferential allotment of warrants in Ambuja Cements to enhance their stake in the cement major they had acquired from Holcim.

As per the terms of the preferential allotment of warrants, Ambuja Cements has completed the allotment of 47,74,78,249 (47.75 crore) warrants to Harmonia Trade and Investments (Adani group investment company) at an issue price of Rs418.87, which is substantially below the current market price. The paid-up value of the warrant would be 25% of the warrant price which would be Rs104.72 per equivalent share. The total transaction size is valued at Rs5,000.15 crore. While this being a preferential allotment of shares, it would be EPS dilutive and will also enhance Adani’s stake in Ambuja Cements.

Since these are warrants that are privately placed, they would not be listed now. However, once the warrants are converted into shares, they would be listed and traded on the NSE and the BSE. As per the terms of the warrant allocation, each warrant would be converted into 1 equivalent share of Ambuja Cements. The total value of the transaction would be Rs20,000 crore, which would be the amount payable by Adani government to infuse the additional capital and increase their stake in the company. The warrants have an expiry of 18 months and these warrants can be exercise in tranches through this period.

It may be recollected that Gautam Adani-backed family office had acquired the Holcim stake in Ambuja cements and ACC to become the second largest cement player in India. With ACC and Ambuja under its fold, the Adani group now controls about 70 MTPA of cement capacity, second only to Ultratech which has 125 MTPA capacity. Adani also plans to double the capacity of ACC and Ambuja to take the group’s total capacity to 140 MTPA by the year 2028. The deal relegates Shree Cement to third place in terms of cement capacity and makes a real pitch for rapid consolidation in the cement industry, which his already visible.

When the deal was signed with Holcim, Adani had paid $6.5 billion for the stakes in Ambuja Cement and ACC Ltd. Post the transaction with Holcim, Adani has a holding of 63.15% in Ambuja Cements and 56.69% in ACC. It must be remembered that Ambuja Cements already held 50.05% in ACC Ltd, so effective control does pass on to Adani group. Both the companies have been replaced at the top by Gautam Adani and his son Karan Adani respectively. Adani group is hopeful that their stake enhancement would be value accretive to all the stake holders, despite the stock price having gone up sharply in recent days.

The market cap of Ambuja Cements already stands at Rs1.01 trillion. However, it may be noted that just ahead of the recent AGM of Ambuja Cements to vote on the open offer, proxy firm IIAS had urged the shareholders of Ambuja Cements to vote against the private placement of warrants on preferential basis to the Adani family. They had objected to the price being too low and promoters hiking their control through the back door. However, an overwhelming majority of the stakeholders voted in favour of the Adani group and also in favour of the decision to allot the warrants at a concessional price to Adani family office.