Ambuja Cement on Tuesday announced that it will acquire 46.8% of Orient Cement Ltd (OCL) at an equity value of Rs 8,100 crore with an aim of reaching 100 MTPA cement capacity in FY25 and improving its pan-India market share by 2%.
Additionally, the cement giant make an open offer to acquire additional 26% stake. “Within 3-4 months, the Open Offer shall be completed in accordance with the provisions of the SAST (Substantial Acquisition of Shares and Takeovers) Regulations. The Open Offer is being made at Rs 395.40 per equity share, which has been determined in accordance with SAST Regulations,” informed the company through stock exchange filing.
Shares of both the involved cement players were trading in the green after the announcement of acquisition deal. Ambuja’s shares went up 1.49% at Rs 580 while shares of Orient Cement were trading at Rs 358.25, up 1.65% as of 9:20 am.
Ambuja will acquire 46.8% shares of OCL from its current promoters and certain public shareholders. The acquisition will be fully funded through internal accruals.
“This timed acquisition marks another significant step forward in Ambuja Cements’ accelerated growth journey, increasing cement capacity by ~30 MTPA within two years of Ambuja’s acquisition,” said Karan Adani, Director of Ambuja Cements.
“OCL’s strategic locations, high-quality limestone reserves and requisite statutory approvals present an opportunity to increase cement capacity in the near term to 16.6 MTPA,” said the statement.
Adani Group, which is a key player in India’s infrastructure and materials sector with a strong presence in airports, ports, mines, energy and real estate, has been flexing its muscles in another sector crucial to India’s infrastructural growth — cement.
How Adani cemented its position in industry?
Cement was one missing piece in Adani’s infrastructure game which it got last year. It made a splash in India’s infrastructure and materials space by buying Ambuja Cements and ACC Limited.at $10.5 billion from Switzerland’s Holcim funded by debt. That made Adani Group India’s second biggest cement maker after UltraTech.
Adani Group’s coal, power and logistics businesses offered great scope of synergy with the cement business, promising structural reduction in cost of production of cement.
Adani was also relying on continuation of government spending on infrastructure building in India for a few decades. Cement is a key component of that. Despite a crowded sector, Adani went ahead to buy Ambuja and ACC counting on synergistic benefits and adjacencies that his existing businesses will deliver.
In August this year, Adani’s Ambuja Cements bought Sanghi Industries in Gujarat at an enterprise value of Rs 5,000 crore. It has a production capacity of 6.1 MTPA. Sanghi buy was aimed at expanding market presence and strengthening product portfolio. Sanghi Industries’ integrated manufacturing unit at Sanghipuram in Gujarat’s Kutch district is India’s largest single-location cement and clinker unit by capacity.
Cement prices saw a4% compounded annual growth in the last four years with prices reaching an all-time high of around 391 rupees per 50-kg bag. Heightening competitive intensity and softening input costs are set to reverse the trend, according to Crisil which expects prices to be 1-3% lower in the current financial year.
