Holcim India units sale: FEMA regulations may put a spanner in Ambuja Cement, ACC deal

The race for Holcim’s India assets on sale, Ambuja Cement and ACC, is hotting up. The deal-win will boil down to the suitor who ties up the mammoth funding fastest, considering that the deal value is defined by the Foreign Exchange Management Act (FEMA) guidelines, sources with direct knowledge have said.

People in the know add that the Holcim deal value is likely to be close to Rs 70,000 crore, as per FEMA guidelines that limit the repatriation amount by the foreign promoter while selling a listed entity in India.

The Foreign Exchange Management (Non-debt Instruments) Rules, 2019 states under price guidelines that Securities and Exchange Board of India regulations will be followed in specific transactions regarding listed companies, “the price at which a preferential allotment of shares can be made under the Securities and Exchange Board of India Guidelines, as applicable, in case of a listed Indian company.”

The Foreign Exchange Management (Non-debt Instruments) Rules, 2019 state that Securities and Exchange Board of India (SEBI) regulations will be followed in specific transactions regarding listed companies. It says, “…the price at which a preferential allotment of shares can be made under the Securities and Exchange Board of India Guidelines, as applicable, in case of a listed Indian company.”

FEMA rules say, “The guiding principle shall be that the person resident outside India is not guaranteed any assured exit price at the time of making such investment or agreement and shall exit at the price prevailing at the time of exit.”

Sources suggest that all three strategic players -- Adani, JSW, and Aditya Birla Group -- are engaged in exploring all options to raise around Rs 70,000 crore, which could be the total approximate outlay for the Holcim deal, which would include the open offers for Ambuja Cement and ACC. Moneycontrol also learns that JSW Steel may have tied up a substantial portion of the funds with a commitment of close to Rs 15,000-20,000 crore from large private equity investors.

Holcim, Adani Group, and Aditya Birla Group did not offer any comment. JSW Group declined to comment on the development. Blackstone said it had no comment.