IiAS to Ambuja investors: Vote against Rs 20K-cr fundraise from Adani firm

Institutional investor advisory firm IiAS has recommended the shareholders of Ambuja Cements to vote against the proposal to raise Rs 20,000 crore from the Adani family firm by issuing warrants during the company’s extraordinary general meeting.

Besides, it has also advised shareholders to vote against the appointment of Ameet Desai and Purvi Sheth as independent directors of the company.

Ambuja Cements, which also owns 50.05 per cent in ACC Ltd, has called an Extra Ordinary General Meeting (EGM) of the shareholders on Saturday.

It has sought shareholders’ approval on 12 resolutions, which include preferential allotment of 47.74 crore warrants at a price band of Rs 418.87 to Harmonia Trade and Investment Ltd, an Adani group entity, totalling Rs 20,001 crore in one or more tranches.

The company has also sought approvals for the appointment of Adani Group chairman Gautam Adani, his son Karan Adani and two directors and four independent directors on the board.

In its voting advisory, IiAS has said: “Assuming full conversion of the warrants, the issue will lead to a dilution of 19.4 per cent on the expanded capital base which is high. Promoter shareholding will increase to 70.3 per cent from the current 63.1 per cent.”

Moreover, the issue price is at a 16.3 per cent discount to the current market price of Rs 500.2 and at an 8.8 per cent premium to the acquisition price from the Holcim Group.

The advisory firm said Ambuja Cements already had a cash and cash equivalent balance of Rs 3,840 crore on a standalone basis and Rs 8,500 crore on a consolidated basis.

It understands the rationale for the capital infusion, given the substantial capex plans of the company.

“Notwithstanding, we do not favour preferential issue of warrants to promoters since it gives promoters the option to ride the stock price for 18 months. Subsequently, if the promoters decide not to subscribe to the remaining 75 per cent, it could have material implications for the company’s long-term plans. We do not encourage warrants to promoters and rather all the money be brought in upfront,” it said.

The voting advisory also asked shareholders to vote against the appointment of Ameet Desai as an independent director. Desai, who had held various positions with Adani Group, did not have a cooling-off period.

While for Purvi Sheth, the report said she serves on the boards of four listed companies and is also the managing director at Shilputsi Consultants. Therefore, her high number of directorships on listed companies are not in keeping with the spirit of the regulation, it added.

Last month Adani Group announced the completion of the acquisition of Ambuja Cements and ACC for a total consideration of USD 6.5 billion, which includes the buyout of Swiss major Holcim’s stake in the two firms and subsequent open offers to minority shareholders.

Days after the acquisition, Adani group had pledged his entire stake in Ambuja Cements & ACC Ltd worth USD 13 billion to the Hong Kong Branch of Deutsche Bank.

Adani had acquired Ambuja Cement and ACC through Mauritius-based SPV Endeavour Trade and Investment Limited (ETIL), which is owned by Xcent Trade and Investment Ltd (XTIL).

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