As expected, cement makers ACC and Ambuja Cements just managed to get the resolution for an increase in royalty to parent Holcim passed despite opposition from minority shareholders.
As expected, cement makers ACC and Ambuja Cements just managed to get the resolution for an increase in royalty to parent Holcim passed despite opposition from minority shareholders.
As per data shared by the companies on Tuesday, 75.65% of ACC’s shareholders and 71.8% of Ambuja Cements’ shareholders supported the ordinary resolution for increase in the royalty to 1% of net sales.
However, a closer look at data reveals that 88.6% of the ‘non-promoter’ shareholders of ACC voted against it. Similarly, for Ambuja Cements, 83% of them voted against it.
The resolution was passed successfully mainly because half of the non-promoters abstained from voting even as the promoters who fully participated voted for the hike.
Holcim holds nearly 50.3% shares in ACC Ltd and 50.6% stake in Ambuja Cements.
Shareholder advisory firms believe the hike would not have passed muster if the company had adopted special resolution instead of ordinary resolution.
“Had the company put the increase in royalty through a special resolution, this would have been defeated in the case of Ambuja Cements, and just scraped through for ACC,” Amit Tandon, managing director, Institutional Investor Advisory Services, said in a note on Tuesday.
Stakeholders Empowerment Services (SES), another proxy advisory firm that had advised minority investors to vote against the resolution, also believes that the companies have adopted good corporate practise only on paper and not in spirit.
“If the companies were really intending to adopt good corporate governance practice, they would have kept the proposed law in mind and moved a special resolution, which would have required an approval from 75% of the voting members,” SES analysts wrote in a note a few days back.
The advisory firms were against the hike considering the technology transfer from Holcim hasn’t really benefited the two cement companies in improving manufacturing or financial performance.
The SES analysts noted that the operating margin for Ambuja Cements is lower than that of Shree Cement (although higher than Ultratech Cement). “Additionally, the Ebitda margin for ACC is the lowest in its peer group. Further, whereas the Ebitda margins for Ultratech and Shree Cements have improved in 2011-12, the margins for ACC and Ambuja cement have continued their downward trend.”
@nitinpshri
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