UltraTech to Acquire 32. India Cements – 7% @ Rs. 3,954 crore

UltraTech Cement will acquire a 32.7% stake in India Cements for Rs 3,954 crore, raising its total stake to over 55%. The deal strengthens UltraTech's presence in South India and preempts competition from Adani Cement.

The largest cement firm in India, UltraTech Cement , revealed on Sunday it has signed the agreement to acquire 32. This marked AION’s direct acquisition of a 7% stake in India Cements from its promoters and associates for Rs 3,954 crore. This is at Rs 390 per share and will lead to an open offer thus making the total deal size up to Rs 7,100 crore.

India Cements has received regulatory approvals for the transfer of stake in its company to UltraTech Cement which is the part of Aditya Birla Group and due to this UltraTech will have more than 55% stake in this company. This move is as part of the UltraTech strategic direction to consolidate and expand its operations in South India. This was done through an open offer that was priced at a 4. I recommend an 11% premium to India Cements’ last closing price of Rs 374. 6, will be done after obtaining the approval of the research proposal.

In the same month, UltraTech cement bought Binani Cement by investing Rs 1,889 crore for a 22 percent stake. 77% of shares in the India Cements Limited, purchased from an Indian billionaire investor, Radhakishan Damani. This earlier investment was made in its share at Rs 268 per share that the company is trading at today. After this financial investment, the promoter group came to us to divest their stake and it seemed sensible to buy out their stake, UltraTech explained.

India Cements, with an estimated total of 14 Mtpa of grey cement. It has an installed capacity of 45 Mtpa and largely focuses on the South, particularly Tamil Nadu and in Rajasthan. The transaction is anticipated to reach its completion in the next six months.

Speaking at the capital expenditure unveiling, Kumar Mangalam Birla, the Chairman of Aditya Birla Group, said that UltraTech’s investments seek to make India a hub for building solutions globally. It also stated that the India Cements opportunity allows UltraTech to better address the Southern markets and also progress its way towards the 200 mtpa capacity.

It has been met with approval and disapproval from analyst to analysts. Speaking for Nirmal Bang, Jyoti Gupta said that while the increase in the capacity through the acquisition might not be needed in the first place because UltraTech Cement is already in the process of expanding in the region. However, other analysts hold a different view in that the acquisition helps to ward off competition with special focus on Adani Cement.

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At the end of June, the company had installed capacity of 149 million metric ton per annum. currently it is around 5 mtpa in India but the target is set to reach 200 mtpa by the year 2028. The latest acquisition will definitely reinforce UltraTech Cement’s domination in the South region which will help it to counter Adani Cement and other competitors.