Cementing global relationships

Indian companies are increasingly integrating with the rest of the world, whether by acquiring others (public sector steel maker, SAIL wants to acquire 25 per cent stake in an Australian coal mine, as coal is becoming a bottleneck for increasing production) or by getting acquired.
Gujarat Ambuja Cements has entered into an agreement with Swiss Holcim, the world''s second largest cement manufacturer, to take two-third stake in a holding company that has investments in ACC (13.8 per cent , acquired from the Tatas) and in the erstwhile Modi Cements, now called Ambuja Eastern.Holcim, through the holding company, will make a public offer at Rs 370/share, to take its holding in ACC up to 50.01 per cent , at an enterprise valuation of $ 99/tonne, which is a phenomenal valuation. A previous high profile acquisition was stated to be at around $ 80/tonne.
The deal signifies the grit and success of a small player, a late starter in cement, set up in 1986 with only 0.7 million tonne capacity. At that time the gorilla in the industry was ACC, now the object of the takeover. Strangely, the market price of ACC dropped. Gujurat Ambuja''s one-third stake in the holding company is now valued at $ 300 million and should they opt to sell that, this represents a future cash flow stream.
Corporate results for the third quarter are generally better than market expectations, and include some stunning performances. Such as from Tata Steel, which almost doubled its profits after tax to Rs 890 crore on a sale, in the quarter, of 1 million tonne of steel (0.99 million in Q3 last year), more or less the same. This is thanks largely to captive coal mines, plus a move to a higher value mix of products. China is expected to keep sucking in steel, at least till the 2008 Olympics, and those with raw materials under their own control are likely to benefit.
RIL also beat market expectations, with a 52 per cent increase in profit after tax, to Rs 2090 crore on a turnover of Rs 18100 crore, up 42 per cent . But for the various issues being raised the market would have welcomed the results with more enthusiasm. Gujarat Ambuja''s profits for Q2 12/04 were up 50 per cent, and Wipro beat street expectations with a 56 per cent rise in profit to Rs 427 crore. UTI Bank, Asian Paints, Nicholas Piramal, ITC and Bharat Forge came out with good numbers. There were some drops in profits too, from Ranbaxy (down 11 per cent ) and Tata Power, down 25 per cent .
The ADR issue of HDFC Bank was completed, raising $ 253 million. (plus another $ 40 million greenshoe option), and was priced at a 12.5 per cent premium over the domestic price, indicating continuing appetite for good Indian stock. IDBI Bank merged with IDBI in the ratio of 1.42 shares of the former for every 1 of the latter.