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Accept Holcim’s offer for Ambuja Cements – Citi

August 24, 2007

Citigroup research in a report released just a while ago advises investors to accept Holcim’s open offer at Rs154/share for Ambuja Cements Ltd [ACL].

Citi rates ACL Sell/Medium Risk (3M) with a target price of Rs103. Although ACL is likely to trade at a premium to domestic peers, due to higher EBITDA margins, the stock is expensive given: (1) limited visibility on cement pricing moving up as a result of uncertainties arising from unfavorable government measures in CY07; (2) a 20% yoy expected decline in CY08E earnings as large capacities are expected domestically, particularly in North India; and (3) the risk to exports, as substantial new cement capacity is coming up in the Middle East, which would convert the current deficit in that region into a surplus.

Dalal Street Analyst Note:
Kindly note that shares tendered in Open Offer are liable for Long Term Capital Gains Income Tax because you are not paying the STT [Security Transaction Tax] when submitting through open offer. So decide if you want to SELL in the market or accept the open offer.

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