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Warburg cements Ambuja fortune

Mumbai, Dec. 19: Warburg Pincus today sold 5.86 per cent in Gujarat Ambuja Cements (GACL) in a Rs 649-crore block deal that reaffirmed the global fundís famed prowess in parlaying initial stock investments into a fortune.

Capital Income Builder Inc and T. Rowe Price International paid Rs 82 apiece for over 7.91 crore shares, which were offloaded by Affinity Investment and Elm International, both the firms being Warburg affiliates.

The Mauritius-based Affinity palmed off its entire holding of more than six crore shares, while Elm parted with 1.91 crore shares. Bombay Stock Exchange (BSE) data showed Elm owning over 4.09 crore shares initially.

The block deal catapulted Gujarat Ambuja to the top of the turnover charts on Dalal Street. A record 8.07 crore shares changed hands, generating a turnover of Rs 661.51 crore. The deal price of Rs 82 represents a premium of 0.42 per cent on Gujarat Ambujaís closing price today.

In May 2001, GACL issued 80 lakh shares to Affinity Investments at Rs 225 per share, raising the deal size to Rs 180 crore. Along with equity shares, the company also proposed issuing similar number of warrants that entitled the private equity firm to subscribe to 80 lakh shares at the same price. The investments funded capital expenditure. Though Affinity did not convert the warrants into shares, its holding increased over a period of time.

Analysts are of the view that the private equity fund may have made huge gains by selling part of its holding today.

In April this year, Gujarat Ambuja doled out a bonanza to its investors when it announced a bonus issue in the ratio of 1:2 and split the face-value of its stock to Rs 2.

However, the sale of 7.91 crore shares by Warburg comes at time when analysts are pruning growth estimates for the cement industry, which has suffered due to unusually heavy rain in some parts of the country.

Companies have announced disappointing sales figures for November, and industry demand is estimated to grow 8-9 per cent against projections of over 10 per cent.

The lean patch has not skirted Gujarat Ambuja, which posted disappointing results for the first quarter of the current financial year. Net profits on a stand-alone basis fell 17 per cent to Rs 75.28 crore compared with Rs 90.46 crore in the corresponding period last year.

The company was hit by floods in key markets. Sales growth during the quarter was flat due to floods in Gujarat and Maharashtra. Sales at 2.94 million tonnes were almost flat compared with the same period last year.

In recent weeks, Warburg was in the spotlight when it sold its stake in Bharti Tele-Ventures.

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