UltraTech to obtain 32.72% stake in India Cements, deal triggers open offer | Company News

“The open offer will be done subsequently after obtaining all regulatory approvals,” UltraTech said in its statement. 

Last month, UltraTech made a financial investment of Rs 1,889 crore for a 22.77 per cent equity stake at Rs 268 per share. The company had picked this stake from the open market from billionaire investor Radhakishan Damani and his associated entities.

“Post-this (June) financial investment, the promoter group approached us as they wanted to sell their holding in the company, and we found it appropriate to acquire their stake in the company,” UltraTech said.  

India Cements has a total capacity of 14.45 million tonnes per annum (MTPA) of grey cement. Of this, 12.95 MTPA is in the South (particularly Tamil Nadu) and 1.5 MTPA in Rajasthan. The transaction is subject to regulatory approvals and is expected to be completed in six months.

Kumar Mangalam Birla, Chairman, Aditya Birla Group, said: “UltraTech Cement’s investments over the years, both organic and inorganic, have been designed to propel India to become a building solutions champion globally. The India Cements opportunity is an exciting one as it enables UltraTech to serve the Southern markets more effectively and also accelerates our path to 200+ MTPA capacity”.

“It makes little business sense for UltraTech to add capacities through such an acquisition in a market where they already have capacities and expansions underway. If they (UltraTech) maintain focus on capacity utilisation, it will keep cement prices suppressed impacting financials,” said Jyoti Gupta, an analyst with Nirmal Bang.

According to UltraTech’s July investor presentation, the company operates 25 MTPA in South India and plans to add another 10 MTPA by FY27. This is excluding the capacity of 10.75 MTPA expected from the Kesoram Industries deal.

 The company said on Sunday the latest deal provides it an opportunity to evaluate the optimisation/or deferment of the existing capacity expansion plans in the Southern market, given the ready-to-use assets of India Cements.

“This will help augment the company’s only integrated unit in Tamil Nadu – Reddipalayam Cement Works (1.4 MTPA), which has a paucity of limestone with a limited lifecycle,” it added.

The company’s latest acquisition will put another 14.5 MTPA capacity between UltraTech and its closest rival Adani Cement. As of June, UltraTech had an operational capacity of 149.5 MTPA in India and 154.9 MTPA overall (including overseas).  Ambuja Cements-ACC (Adani-promoted entities) operated 77 MTPA as of March, excluding underway acquisitions.

All top four cement makers in India are in a rush to add fresh capacities to capture India’s infrastructure-fuelled demand. UltraTech plans to operate 200 MTPA by 2028, while Adani aims for 140 MTPA in the same period.

Adani-promoted Ambuja Cements has been on an acquisition spree, particularly expanding capacity in South India. Industry analysts see UltraTech’s latest move also as an attempt to keep Adani out of acquiring India Cements.

However, not everyone is convinced the deal is lucrative for UltraTech. “The deal would have made absolute sense for a group like Adani which looks to enhance pan-India presence,” said Gupta from Nirmal Bang.



 

First Published: Jul 28 2024 | 1:01 PM IST