 "UltraTech")
Shares of UltraTech, which is India’s largest cement company, rallied by 6 per cent to touch a fresh peak of Rs 11,811. At around 10.15 am, the company’s shares were up 4 per cent at Rs 11,614. India Cements shares were up 9 per cent at Rs 288 | Fil
KM Birla promoted UltraTech Cement on Thursday announced the acquisition of a 23 per cent stake in Chennai-based India Cements (ICL) in multiple tranches, from the open market, for a total of Rs 1889 crore.
The country’s largest cement maker bought this stake from billionaire investor Radhakishan Damani and his associated entities, leaving India Cements’ promoter stake intact at 28 per cent, with N Srinivasan and other promoter groups.
The Aditya Birla Group-owned company purchased 70.56 million shares of India Cements at an average price of up to Rs 268 per share, with a total deal value of Rs 1889 crore from billionaire investor Radhakishan Damani and his associated entities. It is a non-controlling financial investment and constitutes around 23 per cent of the equity share capital of ICL. The indicative time period for the completion of the deal is one month.
Interestingly, the acquisition has triggered rumours of a hostile takeover of the company by UltraTech. A hostile takeover happens when an external player takes control of the target company, against the wishes of its management.
UltraTech’s acquisition of a 23 per cent stake is significant as the promoter group led by its owner N Srinivasan holds only a 28.42 per cent stake. At present, a 23 per cent stake will not trigger an open offer in the company, but will ensure that a rival player will not be able to make a bid for India Cements. The move is considered strategic by many as UltraTech, the largest cement manufacturer in India, was facing competition from Adani Group, in terms of expansion, particularly in the south market.
This comes at a time when the industry is seeing a series of acquisitions by UltraTech and Adani. With Thursday’s deal, India’s largest cement manufacturer—UltraTech Cement, will further solidify its market leadership. Analysts remain sceptical of UltraTech’s rationale for a non-controlling stake, with rumours ripe for further acquisition announcements. “At $90 per tonne, the deal appears to be a moderate one. However, it is not clear what value a 23 per cent stake will add to UltraTech’s current operations,” said Jyoti Gupta, analyst with Nirmal Bang. She added, “UltraTech is expected to commission its own capacities in the South market shortly. UltraTech will need to infuse cash for optimisation of assets and some of these assets have low limestone deposits.”
A person close to the development said UltraTech does not plan to seek a board seat, despite the eventual ownership of 23 per cent. An email query sent to UltraTech on plans for further increase in its stake in India Cements, and other related queries remained unanswered.
Tushar Chaudhari, analyst with Prabhudas Lilladher, noted, “India Cements has Rs 14.5 mtpa cement capacity along with 11.13 mtpa clinker capacity; which complements well with UltraTech’s southern capacities if it is able to crack a deal with India Cements promoters in future.”
As of March, UltraTech operated 20.5 million tonnes (MTPA) capacity in the South India market, according to the company’s investor presentation. This excludes the 10.75 MTPA that the company will add on completion of its Kesoram Industries deal.
Industry analysts point out that with Kesoram’s capacity, UltraTech will already be the largest player in South India. Further, as part of its own expansion plans, UltraTech was to take its south capacity to 35.5 MTPA by the end of FY27, more than 19 per cent of its estimated capacity of 183.5 MTPA in India by that year.
If UltraTech acquired full control of India Cements, the company’s current south capacity would rise to 35 MTPA with immediate effect, solidifying its South India market presence.
India’s south cement market has been buzzing with deals. Earlier this month, UltraTech’s closest rival Ambuja Cements announced a deal to acquire full control of Penna Cements, another south-based cement company. In April, Ambuja Cements announced plans to acquire grinding capacity from My Home Industries in Tamil Nadu. As of March, Ambuja’s consolidated capacity in the market was at 9.7 MTPA. Its two recent acquisitions—Penna Cement with operational capacity of 10 MTPA and My Home Industries with 1.5 MTPA grinding capacity—will further augment it.
Shares of UltraTech rallied by 6 per cent to touch a fresh peak of Rs 11,811. The company’s shares were up 5 per cent at Rs 11,714 by the end of the day. India Cements shares were up 11.49 per cent at Rs 293.
First Published: Jun 27 2024 | 7:35 PM IST
