MFs sold ACC, Ambuja Cem shares in May in likely reaction to Holcim exit

17 Jun 2022

Domestic fund houses sold shares of Ambuja Cements Ltd and ACC Ltd in May during which their promoter, Holcim Group, announced that the Adani Group was buying its entire stake in Ambuja Cements and ACC for a cash payment of 501.8 bln rupees.

Mutual fund schemes, collectively, cut the number of shares they held in Ambuja Cements by 3.8%, and that in ACC by 7.1%, in May as compared to their collective holding in April, data by brokerage East India Securities showed.

The Holcim-Adani deal was announced on May 15 and it triggered the mandatory open offers by the Adani Group to buy 26% stake each from the public shareholders of Ambuja Cements and ACC.

At the declared open offer price of 385 rupees for Ambuja Cements, the Adani Group would pay 198.8 bln rupees to the public shareholders assuming full acceptance. Similarly, for ACC, it would pay 112.6 bln rupees at its declared open offer price of 2,300 rupees.

Mutual funds collectively net sold 4.9 mln shares of Ambuja Cements shares in May from their April-end holding of 130.3 mln shares. Based on the company’s average closing price of 365.7 rupees in May, the net selling would have been for around 1.79 bln rupees.

In ACC, mutual fund net selling was for 1.22 mln shares which bought down their collective holding to 16 mln shares at the end of May from the end of the previous month. Based on the company’s average closing price 2,219.7 rupees in May, mutual funds would have sold ACC shares worth around 2.7 bln rupees.

According to analysts the selling by mutual funds was likely in reaction to the Holcim-Adani deal, although the data did not indicate it took place before or after May 15 when the deal was announced.

The mutual fund selling was not across the board in cement sector stocks, indicating that the selling in Ambuja Cements and ACC was extraordinary.

In UltraTech Cement Ltd, for instance, fund houses collectively bought shares adding 1% to their collective holding, while in case of Shree Cement Ltd, they sold shares and pared their exposure by just 1%.

Among the fund houses, the major sellers in Ambuja Cements included PGIM India Mutual Fund which sold 3.5 mln shares amounting to 99.1% of its holdings as on Apr 30. Mirae Asset India Mutual Fund sold 7.4 mln shares, or 30% of its holdings, while HDFC Mutual Fund sold 1.5 mln shares and pared its stake in the company by 9.2%.

On the other hand, there was significant buying of Ambuja Cements shares by Quant Mutual Fund, Nippon India Mutual Fund and Mahindra Mutual Fund. Quant MF bought 4.6 mln shares raising its holding in the company to 7.6 mln shares from 3 mln shares, while Nippon India MF bought 3.1 mln shares and doubled its holding in the company.

In ACC, major mutual fund sellers were HDFC MF, Franklin Templeton Mutual Fund, PGIM India MF and DSP Mutual Fund, while major buyers were Tata Mutual Fund and SBI Mutual Fund.

Analysts do not expect the same rate of selling by domestic fund houses in the current month as the share prices of Ambuja Cements and ACC have slipped sharply below their respective open offer prices. The tendering period for the open offer has been tentatively fixed as July 6 to 19 by the Adani Group.