UltraTech Cement, India's biggest cement producer, announced on Sunday its intention to purchase a 32.72% share in India Cements from its promoters and their affiliates. The acquisition, valued at Rs. 3,954 crore, will result in an open offer that, if fully taken up, will increase UltraTech's total expenditure to Rs. 7,100 crore.
After signing the share-purchase agreements and securing regulatory approvals, UltraTech will pay Rs 3,954 crore at Rs 390 per share for its stake in India Cements, according to a statement from the Aditya Birla Group-owned company.
This acquisition will increase UltraTech's stake in India Cements to over 55%, triggering a mandatory open offer at the same price of Rs. 390 per share, which represents a 4.11% premium over India Cements' closing price on Friday.
In an official statement,UltraTech stated "The open offer will be carried out after obtaining all necessary approvals."
On Friday, India Cements shares closed at Rs 374.6 per share. Last month, UltraTech invested Rs 1,889 crore to acquire a 22.77% equity stake at Rs. 268 per share from billionaire investor Radhakishan Damani and his associates.
After this investment, the promoter group approached us with an offer to sell their stake, and we deemed it suitable to acquire it.
India Cements has a total grey cement capacity of 14.45 million tonnes per annum (mtpa), including 12.95 mtpa in the South, mainly Tamil Nadu, and 1.5 mtpa in Rajasthan. The transaction, which is pending regulatory approvals, is anticipated to be finalized within six months.
Chairman of Aditya Birla Group,Kumar Mangalam Birla said that, Ultratech Cement's investments, both organic and inorganic, have been aimed at positioning India as a global leader in building solutions.
He further added,"The India Cements opportunity is thrilling as it allows UltraTech to better serve the Southern markets and speeds up our journey to exceed 200 mtpa capacity."
As per its July investor presentation, UltraTech currently operates 25 mtpa in South India and aims to increase this by an additional 10 mtpa by FY27. This does not include the 10.75 mtpa capacity anticipated from the Kesoram Industries deal.
The company said,"The latest deal provides the company with the opportunity to reassess or delay its existing capacity expansion plans in the Southern market. This will enhance the company's sole integrated unit in Tamil Nadu, Reddipalayam Cement Works (1.4 mtpa), which faces limestone shortages and a limited operational lifespan."
UltraTech’s recent acquisition will increase its capacity by 14.5 mtpa, widening the gap between it and its nearest competitor, Adani Cement. As of June, UltraTech had an operational capacity of 149.5 mtpa in India and 154.9 mtpa globally. In comparison, Ambuja Cements-ACC, which is promoted by Adani, had a capacity of 77 mtpa as of March, not including ongoing acquisitions.
All top four cement makers in India are rapidly expanding to meet infrastructure-driven demand. UltraTech aims for 200 mtpa by 2028, while Adani targets 140 mtpa. Ambuja Cements, promoted by Adani, has been actively acquiring and expanding in South India.
Analysts view UltraTech's recent move as a strategy to prevent Adani from acquiring India Cements.
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