It is argued that there is a tremendous over capacity built in cement industry and there is no increase in demand for cement corresponding to increase in capacity. Hence, presently sale of cement is not remunerative. Thus the outlook for cement industry is not bright. It may be stated that there is concentration of cement producing plants in some part of countries and there is a glut of cement in such states. However, demand for cement is not adequately met in states like Kerala and north-eastern states and prices prevailing are much higher than in surplus states.

Explanatory statement issued by company states: "Company has proposals for acquistions/expansion/modernisation scheme. Theimplementation of the plans would improve the efficiency and profitability of existing cement plants while simultaneously adding to ACC's total cement manufacturing capacity over the next two years".

Cement is a basic industry. With government's project for infrastructure development the demand for cement is expected to increase. Technological upgradation and innovation, energy saving devices and other cost-cutting measures including VRS is a continuous process. The investments in these areas require considerable funds. It will be prudent to finance part of such schemes which has enduring benefits by way of raising equity rather than relying on costly debt finance. Of course, it is a prerequisite that company must be able to service its increased capital from improved prodcutivity and profitability from measures taken.

Is the route of preferential issue to increase promoters holdings justified in the present context, since the option of buyback of share is legally available to the company. It is wellaccepted that premium charged on preferential issue is as per Sebi formula and seems to be fair. Has the company adequate resources to consider buyback of shares. ACC's last balance sheet revealed that there is a sharp drop in its profit. Its debt/equity ratio was 1.5 to 1. By no stretch of imagination can ACC be considered as a cash rich company and that it can use its surplus cash, if any, to buyback shares.

Buyback of share is possible for a cash rich company which has low debt/equity ratio. Besides, the company must be able to generate surplus resources on continuous basis over a period and that there should be reasonable assurance that it will continue to do so in the forseeable future. A company which has reached saturation in respect of product it manufactures and markets, and there is no scope for expansion or diversification can consider returning part of its capital to its shareholders. Generally an industry which is capital intensive and prone to cyclical fluctuations like cement would prefer toconserve its resources rather than resort to buyback of shares.

Presently, the cement industry is passing through lean times. The shares of companies are quoted well below their intrinsic value. This is the ideal time for promoters to increase their holdings. Promoters by resorting to preferential issue which is priced higher than the right issue will enthuse confidence in shareholders that they have faith in the prospects of the company and are willing to increase their stake in the company.

Promoters can also pick up additional shares on renunication forms from existing shareholders, who are not willing to subscribe. Such acquisition by promoters could be considered as creeping acquisition. Thus, promoters can exercise both the options to increase their holding. Since the premium on right shares is at a 30 per cent discount to the present market price it could be considered as investor friendly. Shareholders can renunciate their rights at remunerative price. On the whole the proposal of ACC to increasecapital seems to be fair.

Can Tatas be considered as promoters of ACC? It required business acumen and financial genius of late FE Dinshaw to bring four separate cement manufacturrers namely Tatas, Killick Nixon, Khatuas and Shapoorji Pallonji to merge their companies to form ACC. Cement Agencies Pvt Ltd were managing agents of ACC, Killik Nixon were the largest single shareholder of Cement Agencies.

Each group was represented on the main board of ACC. S Moolgaokar, JRD Tata and KC Backle represented Tatas. When Killick Nixon sold their interest to selling agents of Kohinoor Mills, Kantilal Nyahalchand and ML Apte represented Killick Nixon. Homi Modi was then the chairman of ACC. Thereafter, Dhanmsey Khatau had a long innings as chairman.

In 1969 MRTP Act came into force and ACC registered itself with MRTP as dominant undertaking. Promoters and businessmen used innovative methods to avoid being treated as part of a business group to avert the hassles and rigours of MRTP Act. Strange as it may appearthough Killick Nixon were the largest single shareholder of Cement Agecnies in the eyes of public and government, ACC was considered as part of the Tata group.

Right from inception ACC was professionaly managed as it was a conglomerate of four groups. They had battery of professionals as chief executives such as HC Captian, N Dandekar, Hattangadi, Kamaljisingh and others. However, Tatas represented by S Moolgaokar commanded considerable influence at board meetings and their views ultimately decided the issues and policy matters of ACC. It is arguable that perhaps ACC may not come in technical and narrow sense as Tata group, as defined in MRTP Act. However, neither impersonal professional management nor mere shareholding of a particular business are criterion for deciding who the promoters of a company are. One cannot totally ignore evolution and association of a particular business house in formation and management of a company.

Tata's style of management evolved over years is altogether different. Tataswere partners in managing agency of National Rayon, Kothari Sugars of Madras, Burn group of companies from Calcutta and Forbes Forbes Campbell. AD Shroff represented Tatas on the board of these companies. Except for policy matters in these companies, Tatas left day to day mangement to these companies. Same principles are perhaps applied to ACC also.

Tatas can claim to be a co-promoter who wants to increase its holding in the company with the consent of co-promoters. Historical facts can not be ignored.