Mumbai: The boards of directors of Gujarat Ambuja Cements Ltd (GACL) and Ambuja Cement Rajasthan Ltd (ACRL), formerly known as DLF Cement Ltd, have unanimously approved the merger of ACRL with GACL, subject to necessary approvals.

They have recommended an exchange ratio of 1 new share of GACL to be issued for every 50 shares of ACRL, which is based on the valuation report of M/s NM Raiji and Company.

The management control of ACRL was acquired by GACL in March 2000. ACRL has a 1.5 million-tonne cement plant along with a captive power plant of 21 mw located in Rajasthan.

It markets its cement under the brand name Ambuja Cement and enjoys a leadership position in the markets of Rajasthan, Haryana and Delhi. Since last two years, it has acquired a good market share in each of these markets.

Gujarat Ambuja whole-time director Anil Singhvi says in view of the strategic location of ACRLs cement plant, which fits well into GACLs market strategy of having leadership in the cement markets of north and west India, the proposed merger will not only benefit in terms of this marketing strategy but will also reduce lots of cost on selling and administrative overheads of both the companies. "With the proposed merger GACL will have a leadership position in all the markets from Maharashtra to Jammu and Kashmir."

The current share capital of ACRL is about Rs 261 crore, out of which Rs 128 crore (49 per cent) is owned by GACL. Based on the valuation ratio, GACL will issue 26,62,424 shares to the shareholders of ACRL. This will increase GACLs share capital from Rs 155.19 crore to Rs 157.85 crore, an increase of 1.7 per cent.

Upon merger, the cement capacity of GACL will go up to 10.5 million tones, and with its subsidiary ACEL the total capacity is 12.5 million tonnes. The proposed merger is subject to necessary approvals from shareholders, the Board of Industrial and Financial Reconstruction and any other approvals as may be necessary.