Switzerland’s building materials conglomerate Holcim Group will not incur capital gains tax or any other tax following the stake sale of its Indian assets – Ambuja Cements and ACC – for about $10.5 billion to Adani Group. This gains importance as Hong Kong-based Hutchison was marred in a controversy following a $11-billion deal with UK’s Vodafone Group in 2007.
“Our analysis comes to the conclusion that there is no capital gains or any other tax for this transaction. Never know if any complication would arise, but we assume we will get the 6.4 billion Swiss francs as net proceeds,” Holcim Chief Executive Officer Jan Jenisch said in an analysts’ call on Monday.
This is because there is no capital taken out of the country, while Holcim has also not provided assurance of any indemnities or warranties. Further, all liabilities arising out of ongoing litigations would have to be dealt by the new owners, he said.
Holcim and its subsidiaries executed the share purchase agreement with Endeavour Trade and Investments for the sale of its shareholding in Holderind Investments, which in turn holds shares in the company, Ambuja had said in a stock exchange notification late Sunday night.
According to an Adani Group spokesperson, the acquisition is being completed by an offshore special purpose vehicle of the Adani family, which is not a part of the listed entities or operating entities.
Mauritius-based Holderind Investments, which holds a 63% stake in Ambuja Cements, can claim exemption from capital gains tax under the India-Mauritius tax treaty. Holcim is believed to have discussed these issues with tax experts before the deal was signed, a source close to the development said.
While the deal needs regulatory approvals, including that from the Competition Commission of India (CCI), Holcim entered into the deal with Adani Group as it did not have any presence in the Indian cement sector. “With no prior interests in the cement industry, the deal is unlikely to be against the country’s competition laws,” he added.
On the ongoing legal issues on the allegations of cartelisation, he said the new buyer of the companies would be liable for the anti-trust fines, if any.
CCI, following an investigation in 2016, found Ambuja Cements and ACC (among others) guilty of price cartelisation and had imposed a Rs 6,300-crore fine on 11 cement companies. Of the total Rs 6,300 crore penalty, Ambuja Cements would have to pay Rs 1,164 crore and that by ACC would be Rs 1,148 crore.
The firms later moved the Competition Appellate Tribunal, and then the National Company Appellate Tribunal, which supported the CCI ruling. The case is now being heard by the Supreme Court.
On Sunday, Adani Group announced its largest-ever acquisition and India’s largest ever M&A transaction in the infrastructure and materials space by acquiring Holcim Group’s stake in Ambuja Cements and ACC. Holcim, through its subsidiaries, holds 63.19% stake in Ambuja Cements and 54.53% in ACC (of which 50.05% is held through Ambuja Cements).