Holcim open offer may not be smooth road

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Holcim open offer may not be smooth road

Holcim has acquired an additional 3.9% stake in Ambuja Cements from Sekhsaria at Rs 154 per share. According to analysts, in this open offer, the minimum acceptance ratio works out to be 32%.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Holcim deal values Ambuja Cem at $5.5 bn: DSP ML Holcim-Ambuja deal: What's the former's gameplan? Holcim price doesn't reflect sector bullishness: A Singhvi Holcim buys addl 3.9% stake in Ambuja Cements ALSO READ See latest News about Ambuja Cements See previous management interviews See what other Experts & Brokerages are saying about Ambuja Cements Ambuja Cements BSE | NSE 25/05/12 Are Mutual Funds betting on Ambuja Cements?

Holcim has acquired an additional 3.9% stake in Ambuja Cements from Sekhsaria at Rs 154 per share. It will also make an open offer to the shareholders of Ambuja Cements at Rs 154. The open offer will happen towards the end of November, the company added.

According to analysts, in this open offer, the minimum acceptance ratio works out to be 32%, that in plain language means, if you have three shares, one of three will be accepted.

For eg. if one has bought 100 shares at the price, which in the morning was Rs 130, the cost will be around Rs 13,000. The open offer will conclude by November end, so three years of opportunity cost at 1% per month will give you about 3%. So by that calculation of 3%, Rs 400 will be added to the cost price. Which makes the the total cost of 100 shares around Rs 13,400.

As the tender is for one share out of three shares, one will be able to tender around 32-33 shares at the price of Rs 154, which will make a profit of around Rs 4,900. The residual value for the remaining 68 shares is around Rs 8,500, and the residual value, that is the post offer break-even price, works out to Rs 125.

The floor price gets set at around Rs 135-136, but Rs 132 is the price, which is the 'no profit no loss' zone for the stock. Pominent shareholders in Ambuja Cements like LIC holds around 11% stake followed by Capital India Builder Fund , which holds around 4.5% stake. So there are financial institutions that control nearly 20% stake in the company and there are doubts that the open offer will go very smoothly.