ACC took a good stride up backed by foreign institutional buying on hopes that Gujarat Ambuja may be asked to make an open offer for the company.

The scrip of the largest cement maker in the country jumped up 4.12% to Rs 153 by 14:53 IST on Wednesday. The scrip recorded volumes of over 892,000 shares on BSE by then. In the seven sessions between 31 January and 11 February 2003, ACC rose 5.6% to Rs 146.95 from Rs 139.10.

As per market talk, CL Securities has been actively buying on the counter on behalf of some FII over the last few sessions. Indian insurance companies - LIC and GIC -, meanwhile, are supposedly booking profit on the counter today.

Dealers say the accumulation on the counter is on rumours that the Securities and Exchange Board of India may order Gujarat Ambuja Cements to make an open offer to the company's public shareholders.

Earlier, the Securities Appellate Tribunal ordered Sebi to take a re-look at the deal involving GACL acquiring a 14.45% stake in ACC. In a statement on 25 October 2002, SAT said that Sebi had jumped to conclusions while stating that the acquisition of stake by GACL in ACC was not tantamount to a change in management control, and, therefore, did not trigger the takeover code.

Earlier Sebi had stated that the Tatas, despite having a 14.45% stake in ACC, did not exercise any control over the company. Therefore, its sale of stake to GACL did not result in change in management control. However, a group of ACC shareholders moved SAT against the Sebi ruling.

SAT asked Sebi to conduct a fresh probe into the deal, saying the market regulator's earlier findings were not complete and adequate. SAT told Sebi to look into whether GACL is in a position to effect control over ACC (to look afresh as to whether the acquisition of 14.45% stake by GACL resulted in change in managment control or not). If Sebi comes to the conclusion that GACL has, in fact, acquired management control over ACC, GACL will have to make an open offer at Rs 370 per equity share plus interest for the last three years. In 1999-2000, GACL had bought the Tata group's entire holding of 14.45% in ACC in three tranches at Rs 370 per share.

The scrip has also been vindicated by hopes of improved cement off-take in the wake of increased construction activity.

In January 2003, ACC registered a 11.68% rise in despatches to 1.19 million tonnes, from 1.07 million tonnes in the same month a year earlier. Production rose by 9.07% to 1.15 million tonnes, from 1.05 million tonnes a year ago. Cumulative production and dispatches figures for the period April to January 2003 were at 11.37 million tonnes and 11.36 million tonnes, respectively.

Last month, ACC announced its third quarter results (ended 31 December 2002). The company posted a 19.4% rise in net profit to Rs 20.21 crore compared to Rs 16.93 crore in the corresponding period of the previous year. However, net sales declined by 3.06% to Rs 682.28 crore (Rs 6.82 billion) from Rs 703.86 crore (Rs 7.03 billion) in DQ 2001.

The Q3 results were poor and the rise in net profit was mainly due to an extraordinary income of Rs 15.35 crore (Rs 0.14 crore). If the EO is deducted than the net profit shows a huge drop of 71% at Rs 4.86 crore.

Cement analysts say the demand for cement is expected to rise due to the boom in housing, road construction and infrastructure activities, but till cement production is not curbed to sustain cement prices at higher levels, profitability of companies in this sector may not improve. Profitability of cement makers is directly dependent on a rise in realisations. As a consequence, firm cement prices are vital to the industry.

The cement supply overhang, meanwhile, is expected to continue. In the current month, Sanghi Industries was expected to commence cement production, but it has postponed it to March 2003. If Sanghi Industries starts production, the supply overhang situation will worsen, which may pull down cement prices.

BSE Code: 500410