India Cements, N Srinivasan, Chennai Super Kings.
You may remember many things after reading this. But I remember only one thing.
Hostile takeover.
That is why My first reaction after reading the news that Radhakrishan Damani wanted to acquire India cement was that Acqurar became the target.
There are two ways to grow your business. 1. Build organically internally. 2. Acquir someone else. Both have advantages and disadvantages like for buying someone else you may not get all the information. You may end up paying extra. Debt financing is another issue. Organically developing will take time. You may end up losing some opportunities. But sometimes you receive some worthy option. You need to watch it.
One great sign is companies having promoters holding 20-25%. One reason the cement sector is, in many such cases, is that it is capital intensive business. Another case study will be L&T Cement by Grasim.
In January 1998, Business India reported, “Rubbing salt into his wound is the fact that when IndiaCements was passing through difficult times in 1987-89, the then IDBI chairman, S. S. Nadkarni, had requested Raju to take over the ailing company. But he had refused, saying “one should not close in on a weak colleague.”
Ironically India cement ended up buying Rassi cement. But this was not the first for Srinivasan. In 1989, Srinivasan took over as the managing director of India Cements Ltd. (ICL). Srinivasan made his first acquisition within six months of taking over when he outbid Gujarat Ambuja Cements Ltd. (GACL) and L&T to take over the capacity of 1 million tonnes per annum Coromandel Fertilizer cement plant. South India is generally Cement hungry. So It was one significant consolidation.
The company also owns the Chennai franchise of IPL. India Cements acquired the rights to the franchise for ten years for $91 million, making it the fourth most expensive team in the league behind Mumbai, Bangalore, and Hyderabad. Former ICC Chairman N. SRINIVASAN was the de-facto owner of the Chennai Super Kings, as the vice-chairman and managing director of India Cements Ltd. This team was well known for its captain M. S. Dhoni. Son-In-law of N. Srinivasan was one name in 2013 IPL Spot-fixing.
As a cement manufacturer, the company has ten cement plants, only one in Rajasthan. The remaining nine plants are in south India, having around 16 million tonnes per year. This company’s shareholding pattern ( as of March 20) shows that the promoter entity holds only 27.18%. Mutual funds have 2.7% out of 2.35% held by Sundaram mutual funds in their different mutual funds. 12% owned by foreign funds. LIC held 4.71%. Radhakrishna Damani had around 20% through his family holding.
In my opinion, If tomorrow Radhakrishna Damani comes up with an open offer, Foreign investors and mutual funds can sell if the price is reasonable. LIC may support promoters. What retail investors will do will decide what will happen with the company. I am sure Radhakrishnan Damani may not be interested in doing any Hostility. There is a possibility that N Srinivasan may try to find a White knight. Right now, Promoter + Radhakrishna Damani makes 47-48% holding. As the equity is very low, 30 crores, out of which strong hands hold more than half, I expect this to show some wild actions. As per the recent report of Bloomberg Quint, even though N Srinivasan is the biggest shareholder, Part of his holding is pledged. I am sure Damani can pay the amount to banks and acquire it.
The simple reason why Radhakrishnan Damani choose India cement is that replacement costs $63 per tonne. Wildly few companies can beat them in this parameter. Ultra tech cement, ACC, and Ramco are all behind.
I believe corporate governance is beyond doubt one important crucial No one knows it better than Radhakrishnan Damani. On this front, I have a positive idea of India cement. This maybe Rebirth for India cement for those who don’t like management with corporate governance
