The Securities and Exchange Board of India (Sebi) today slapped a Rs 25-crore (Rs 250 million) penalty on Swiss cement major Holcim for its failure to comply with takeover regulations during its acquisition of Associated Cement Company last year. This is the biggest monetary penalty imposed by the market regulator till date.

Holcim has been asked to pay the fine in 45 days. The company can file an appeal before the Securities Appellate Tribunal (SAT) against the Sebi order.

In its order, the Sebi said Holcim had violated takeover guidelines as it failed to come out with an open offer in Everest Industries [Get Quote] Ltd, in which ACC held a 76 per cent stake.

Holcim had directly bought a 13.82 per cent stake in ACC from Ambuja Cement [Get Quote] India, and subsequently scaled up its stake to 34.72 per cent through an open offer. This triggered the takeover code in Everest Industries, a listed entity; but the Swiss cement-maker did not comply with this rule, the Sebi said.

Though Holcim contended that Everest Industries was into an unrelated business of asbestos, which it had no plans to enter in India, the Sebi order delivered by adjudicating officer Amit Pradhan said: "Holcim's conduct towards Indian consumers, by not producing products with asbestos fibre, is indeed exemplary; but that cannot be a mitigating factor for this proceeding."

The order said the money involved as a result of the default by Holcim was "anyway above Rs 50 crore (Rs 500 million) and it was appropriate to impose a penalty of Rs 25 crore, which would be commensurate to the nature of the violation by Holcim."

The matter dates back to January 2005 when the Swiss MNC acquired a 67 per cent stake in Ambuja Cement India, which held shares in ACC. Subsequently, Holcim, along with persons acting in concert (PAC), made an open offer to raise its combined holding in ACC to 52 per cent.

However, the offer fell short of the target. Since ACC held 76 per cent in Everest Industries, it was alleged that the Holcim acquisition led to its indirect control of this company.

Holcim submitted to the Sebi that its global policy did not allow it to engage in non-core activities, and that the group had divested non-core assets worth $1.25 billion in four years beginning 2002.

It said it did not want to manufacture products using asbestos fibre in India -- although such manufacture was permitted in the country -- as part of its global policy. It further contended that the acquisition of Everest Industries was the result "of a global arrangement."

But this argument did not find favour with the Sebi. At present, the management control of Everest Industries has been transferred from ACC to a trust managed by former managing director of Gujarat Ambuja [Get Quote] N S Sekhsaria, who was one of the promoters of Ambuja Cement India.