Search the Internet          Tips  Sites: Finance, Investment

ACC junks plan to sell 2 captive units to Tata Power

Rumi Dutta & Arijit De

The Associated Cement Companies has dropped its plan to sell the two captive power plants at its Jamul and Kymore units to Tata Power. The sale, through which ACC was to raise around Rs 3 billion, was planned in lieu of a preferential allotment to the Tatas in 1999, which the financial institutions did not allow.

The company was planning to mop up the amount to part-fund its Rs 7.50 billion capital expenditure plan drawn up to enhance its capacity by 3 million tonne.

The sale had met with a roadblock with the Madhya Pradesh government, whose approval was critical, sitting on the clearance for months. The company had even obtained shareholders' approval for the sale of the power units.

Senior executives of Tata Power said: "We have now decided against going ahead with the earlier arrangement with ACC." The cement major will now continue to manage the two power plants.

Tata Power and ACC had already had a similar agreement over the Wadi unit power plant, which was transferred to Tata Power for Rs 900 million. With ACC increasing capacity at Wadi, the power plant capacity at Wadi too has been expanded.

Analysts said that given ACC's improved price realisations in recent months, it would not be under much pressure to sell the power units to raise cash. ACC officials said it was in no hurry to work out any alternate plan.

The company has at present trained its sight on becoming the largest cement player in the country, a position which it held for six decades. It is planning to increase its Gagal unit capacity by another 1.3 million tonne that will take its capacity to 16.3 million tonne.

The Tata group, one of the original promoters of ACC, had planned to hike stake in ACC through a preferential allotment of equity shares at for Rs 1.89 billion.

However, financial institutions, the largest shareholders in ACC had then opposed the preferential allotment on grounds that the allotment price was "too low".

Subsequently, the Tata group, which was in the midst of restructuring its group structure decided to exit from ACC and sold its entire 14.4 per cent stake to Gujarat Ambuja Cement.

The association with Gujarat Ambuja has significantly benefitted ACC as it managed to charge prices to customers from the northern markets, analysts said.

Powered by

YOU MAY ALSO WANT TO READ:
The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report