Institutional Investor Advisory Services India (IiAS), a proxy advisory firm, has asked shareholders to vote against Ambuja Cements’ proposal to raise up to Rs 20,001 crore from an Adani family firm.

The advisory firm also asked shareholders not to support two other resolutions — both appointments were of independent directors – even as it green-flagged all the remaining nine motions.

“Assuming full conversion of the warrants, the issue will lead to a dilution of 19.4% on the expanded capital base, which is high. Promoter shareholding will increase to 70.3% from the current 63.1%. The issue price is at a 16.3% discount to the current market price of Rs 500.2 and an 8.8% premium to the acquisition price from the Holcim Group,” IiAS said in its note.

“We understand the rationale for the capital infusion, given the substantial capex plans of the company. Notwithstanding, we do not favour the preferential issue of warrants to promoters since it gives them the option to ride the stock price for 18 months. Subsequently, if the promoters decide not to subscribe to the remaining 75%, it could have material implications for the company’s long-term plans,” IiAS said, adding it does not encourage warrants to promoters and rather all the money be “brought-in upfront”.

Ambuja Cements, which was acquired by Adani Group, convened an extraordinary general meeting on October 8 to seek shareholders’ approval for all its 12 resolutions.

Earlier in September, the company announced plans to raise up to Rs 20,001 crore by way of preferential allotment of warrants to the Adani family firm Harmonia Trade and Investment. Ambuja Cements was to issue 477.48 million warrants to Harmonia Trade on a preferential basis, constituting 19.39% of share capital (post issue) at Rs 418.87 each.

Each warrant can be converted into a share within 18 months of issuance.

In September, Adani Group completed the acquisition of Ambuja and ACC through a special purpose vehicle, Endeavour Trade and Investment. The deal, announced on May 15 this year, comprises Holcim’s entire 63.11% stake in Ambuja Cements, which owns a 50.05% interest in ACC, and its 4.48% direct stake in ACC.

IiAS also asked shareholders to vote against the appointment of Ameet Desai and Purvi Sheth as independent directors for three years from September 16. Desai, who had held various positions with Adani Group, did not have a cooling-off period, and Sheth’s high number of directorships with listed companies were cited as reasons.

However, it asked shareholders to support other resolutions including the appointment of Gautam S. Adani, founder and chairperson of the Adani Group, and his elder son Karan Adani’s appointment as non-executive non-independent directors.