Vivek Maheshwari & Bhavesh Pravin Shah of CLSA look into implications.
LafargeHolcim levied a 1 per cent technical know-how fee in 2013 after independent directors objected to a 2 per cent payout. The agreement was for five years, with 1 per cent rate for 2013-14 and a review thereafter, but the rate was unchanged until 2017. ACC and Ambuja in 2013 also took shareholder approval on the premise of good corporate governance but despite >80 per cent of minority votes against the proposal, fees were levied as the parent voted in favour. Despite the agreement expiring in December 2017, the parent has not yet renewed the agreement, a surprise. A proposal to raise fees could be a big negative and minority approval would not be required, although past experience suggests the group may still seek their approval. Final outcome at a rate other than 1 per cent would impact ACC/Ambuja's EPS (by 5-8 per cent for every 1 per cent change in fees).
Parent proposed fee in India