There is no capital gain or any other tax for the Adani deal: Holcim CEO Jan Janish

After the sale of its সম্প 10.5 billion stake in Indian assets – Ambuja Cements and ACC – to the Adani Group, the Swiss building materials aggregate Holsim Group will not incur capital gains tax or any other tax. This is significant because Hong Kong-based Hutchison became embroiled in controversy in 2007 after a $ 11 billion deal with the UK’s Vodafone Group.

“Our analysis concludes that there is no capital gain or other tax for this transaction. I don’t know if there will be any complications, but we assume we will receive 6.4 billion Swiss francs as net income, “Holcim CEO Jan Janish told analysts in a call on Monday.

Because no capital was taken out of the country, Holcim did not guarantee any compensation or warranty. Further, all liabilities arising from the ongoing lawsuit must be dealt with by the new owners, he said.

Holcim and its affiliates have entered into a share purchase agreement with Endeavor Trade and Investments to sell its shareholding in Holderind Investments, which has resulted in the company’s shares, Ambuja said in a statement to the stock exchange late Sunday night.

According to a spokesman for the Adani Group, the acquisition is being carried out by the Adani family’s offshore special purpose vehicle, which is not part of the listed company or operating entity.

Mauritius-based Holderind Investments, which owns 63% of Ambuja Cement, can claim exemption from capital gains tax under the Indo-Mauritius Tax Agreement. Holcim is thought to have discussed the issue with tax experts before signing the agreement, a source close to the development said.

Although the agreement required regulatory approval, including from the Competition Commission of India (CCI), Holcim entered into the agreement with the Adani Group because it had no presence in the Indian cement sector. “Without any prior interest in the cement industry, the agreement is unlikely to be against the country’s competition laws,” he added.

Regarding the ongoing legal issues over the cartelization allegations, he said the companies would be liable for anti-trust fines if they had new buyers.

CCI, after an investigation in 2016, found Ambuja Cements and ACC (among others) guilty of price cartelization and fined 11 cement companies Rs 6,300 crore. Out of the total fine of Rs 6,300 crore, Ambuja Cement will have to pay Rs 1,164 crore and the ACC will have to pay Rs 1,148 crore.

The companies were followed by the Competition Appeal Tribunal and then the National Company Appeal Tribunal, which upheld the CCI judgment. The case is now being heard in the Supreme Court.

On Sunday, Adani Group announced its largest-ever acquisition of infrastructure and equipment and India’s largest M&A transaction through the acquisition of Holcim Group’s partnership in Ambuja Cements and ACC. Holcim, through its affiliates, owns 63.19% in Ambuja Cement and 54.53% in ACC (of which 50.05% is through Ambuja Cement).