India Cements Ltd’s share price rises up as UltraTech Cement Limited acquires stake in the company

India Cements shares surge 26% over two days following UltraTech Cement's announcement to acquire a 23% stake. The move, approved by UltraTech's board, allows purchase of up to 7.06 crore shares at ₹267 each. Experts advise caution for new investors amid the rally.

This has waken the Indian cement industry and in the last two trading sessions, IndiaCements stocks rose to 26% because of the plan for UltraTech Cement to invest in the firm. 

UltraTech Cement from the Aditya Birla Group said on Thursday that its board had okayed the transaction to buy out 7. It has also invested Rs 06 crore through equity shares in India Cements Limited (ICL) as well as Rs 03 crore in Larsen & Toubro through secured redeemable non convertible debentures. The deal, in value terms, is nearly equal to 23% ICL’s total paid up capital and the maximum price that has been worked out is ₹267 per share. 

The market was quick to respond to this news and in a few days the share of India Cements opened at ₹285 on Thursday as compared to the closing at ₹229 on Tuesday. 38 in National Stock Exchange that is the NSE. The stock posted further gains to reach its intraday high of ₹ 288. 88. 

Avinash Gorakshkar, Head of Research at Profitmart Securities said on the rally, “The Aditya Birla group company has declared something in the exchange filing today which has delighted the Dalal Street bulls. 

For the existing shareholders the surge is in fact good news but the new investors are advised to be careful. In a recent interview, Sumeet Bagadia, the Executive Director at Choice Broking, has recommended the current shareholders to place trailing stop loss at ₹265 per share and the short-term target might be ₹325. 

For those willing to start investing in the stock, Bagadia warned that the stock is likely to decline and he is bullish and waiting to accumulate the stock in the ₹ 275- ₹ 280 range. 

However it, in the filed documents, UltraTech Cement tried to defend the investment saying that the investment is non-controlling and purely financial in nature. It has been considered as strategic in the emergence of more competition in the Indian cement industry. 

This state of affairs, once the dust settles down, will raise questions about the implications of this state of affairs for the cement business in India and more particularly its competitiveness, market share and price and future consolidation of the cement industry. 

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Market speculators and other stakeholders are likely to seek similar activities or any other business move by the India Cements and UltraTech Cement conglomerates in the future.