InvestorQ : What is the outcome of the proposed allotment of warrants by Ambuja Cements to the Adani promoter family?
Aashna Tripathi made post

What is the outcome of the proposed allotment of warrants by Ambuja Cements to the Adani promoter family?

Aditi Sharma answered.
1 month ago

The decision to allot warrants to the Adani family office by Ambuja Cements was taken after Gautam Adani took over as the chairman of the board of Ambuja Cement. Now the recent AGM approved the issue of warrants and the company has already completed the process of issuing the warrants to the Adani family against contribution of Rs5,000 crore to the coffers of Ambuja Cements to boost their future investment plans. The allotment is being made to Harmonia Trade and Investment, which is an Adani group company. The placement is being done on a preferential issue basis to the promoters of the company.

The preferential allotment was necessitated after the open offer to buy another 26% from the minority shareholders of Ambuja Cements did not go through due to the price not being attractive. That had happened after the stock had rallied very sharply post the deal announcement of Adani taking over the stake of Holcim in Ambuja Cement and in ACC Ltd. With the open offer not going through successfully, the Adani group had little choice but to rely on the preferential allotment of warrants in Ambuja Cements to enhance their stake. That process has now just been formalized by the promoters. Here is how it will work.

Under the terms of the preferential allotment of warrants, Ambuja Cements completed the allotment of 47,74,78,249 (47.75 crore) warrants to Harmonia. The allotment was done at an issue price of Rs418.87 per share, which is below the current market price of over Rs530 at this point of time. As the first tranche, the Adani family will be paying 25% of the warrant price i.e. Rs104.72 per equivalent share. Thus while the first tranche will be Rs5,000 crore, the eventual allotment of warrants will result in allocation of total fresh shares worth Rs20,000 crore, which is the total funds being raised via preferential allotment in tranches.

The warrants are privately placed and hence the same would not be listed on the stock exchanges. Once these warrants are converted into equivalent equity shares, they would be listed and traded on the NSE and the BSE. However, it must be noted that this will enhance the share capital of Ambuja cement and hence it would be EPS dilutive. The warrants have an expiry period of 18 months and would be exercised in tranches during this period. The funds would be used to double the combined capacity of Ambuja Cements and ACC Ltd from the current 70 MTPA to the proposed 140 MTPA by the year 2028.

Both companies saw changes at the top with Gautam Adani and son Karan Adani taking over as chairman of the board of Ambuja and ACC respectively. Incidentally, proxy firm (IIAS) had urged shareholders of Ambuja Cements to vote against the private placement of warrants on preferential basis to Adani family. IIAS had called it against the interests of minority shareholders. However, an overwhelming majority of stakeholders voted in favour of the issue of warrants to the Adani family.