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Last Updated : Mar 13, 2018 12:57 PM IST | Source: Moneycontrol.com

Checkout! How global research firms foresee ACC-Ambuja master supply agreement

The agreement is for supply of cement, clinker and raw materials such as fuels, fly ash, slag and gypsum. This would also include spare parts. According to the pricing formula, for cement they would provide discount of 5 per cent to each other on their average net selling price.

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ACC Ltd and Ambuja Cements - the two Indian units of LafargeHolcim plan to enter into a 'master supply agreement' with each other. Both the companies have sought approval from their shareholders to "enter into, execute and deliver the master supply agreement" with each other, they said in separate regulatory filings.

The agreement is for supply of cement, clinker and raw materials such as fuels, fly ash, slag and gypsum. This would also include spare parts. According to the pricing formula, for cement they would provide discount of 5 per cent to each other on their average net selling price.

"On the basis of a comprehensive evaluation carried out by both the special committee and Board of Directors of the company, the board is of the opinion that there are at present certain constraints in implementing a merger between the company and Ambuja Cements," ACC had said in a filing to BSE.

Ambuja has recently announced a capex of Rs 1,391 crore that it plans on spending on setting up a 3.1 MT greenfield clinkerisation plant at Marwar Mundawa in Rajasthan.

ACC, on the other hand, had announced a Rs 600-crore capital expenditure plan last year in March focused on setting up five ready-mix concrete plants along with undertaking debottlenecking across its projects in the country.

Moneycontrol takes a look about what top research houses think about the Master Supply Agreement between the two companies:

CLSA: Buy on both ACC & Ambuja Cements

The global research firm is of the view that the two companies intend to derive savings with respect to the Master Supply Agreement. It sees a clear rationale for minority shareholders to approve the Agreement.

CLSA has buy ratings on both Ambuja Cements as well as ACC.

Morgan Stanley: Agreement likely to drive faster volume growth

The house feels that the Master Supply Agreement between the two companies could drive faster volume growth. However, it is of the view that there is limited clarity on the quantum of potential cost saving/revenue uptick.

"We believe that the companies are already realising some of the shared/fixed cost synergy," it said.

Deutsche Bank: Agreement will improve plant capacity utilisation 

Deutsche Bank expects benefit from the Master Supply Agreement to accrue from three major areas. It believes that the main objective of the Agreement is to reduce cost to service markets.

It is of the view that the agreement will improve plant capacity utilisation wherever possible. The global research firm prefers ACC to Ambuja Cements on better valuation while the preferred sector picks remain Shree Cement, UltraTech Cement and Dalmia Bharat.

At 12:47 hrs ACC was quoting at Rs 1,574.25, up Rs 10.80, or 0.69 percent. It has touched an intraday high of Rs 1,580.00 and an intraday low of Rs 1,558.00.

Ambuja Cements was quoting at Rs 241.30, up Rs 0.75, or 0.31 percent. It has touched an intraday high of Rs 244.00 and an intraday low of Rs 240.10.
First Published on Mar 13, 2018 12:57 pm
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