India’s largest cement manufacturer UltraTech Cement on Sunday said it will acquire an additional 32.72% stake in India Cements from its promoters and their associates for Rs 3,954 crore, a move that will further cement its leadership position in the sector.
According to analysts, the move could also be an attempt by the Aditya Birla Group company to stop Adani Group from acquiring the south India-based cement firm.
The transaction will be done at Rs 390 per share, and will increase UltraTech’s stake in India Cements to 55.49%, necessitating a mandatory open offer at the same per-share price. Through the open offer, the company will buy up to 80.5 million shares, or 26% of the equity, from public shareholders at Rs 390 per share, totalling approximately Rs 3,142.39 crore.
This means that if the open offer is fully subscribed, the total cost of acquisition will go up to Rs 7,100 crore.
The open offer price is 4% higher than the closing price of Rs 374.60 on Friday.
Earlier, in June, UltraTech had acquired a 22.7% stake in India Cements by acquiring Radhakishan Damani Group’s shares in the company through two block deals totalling Rs 1,889 crore. The transaction was then done at Rs 268 per share.
“Post this financial investment, the promoter group approached us as they wanted to sell their holding in the company, and we found it appropriate to acquire their stake in the company.” UltraTech said in a statement.
“UltraTech Cement’s investments over the years, both organic and inorganic, have been designed to propel India to become a building solutions champion globally. The India Cements opportunity is an exciting one as it enables UltraTech to serve the southern markets more effectively and also accelerates our path to 200+ MTPA capacity,” Kumar Mangalam Birla, chairman, Aditya Birla Group, said.
He added that the southern region is a highly fragmented, competitive and fast-growing market where UltraTech has limited presence.
The acquisition is subject to the receipt of applicable statutory and regulatory approvals from the Competition Commission of India and others.
India Cements has a total group capacity of 16 MTPA, including 1.5 MTPA from its subsidiary, Trinetra Cement. N Srinivasan, who will turn 80 in January, has been at the helm of India Cements since 1989 following the death of his father, TS Narayanaswami. His daughter, Rupa Gurunath, a whole-time director, and his wife, Chitra Srinivasan, who serves as a board director, reportedly have no interest in running the business after Srinivasan steps down due to health issues.
UltraTech has a consolidated capacity of 152.7 million tonne per annum (MTPA) of grey cement. It has 24 integrated manufacturing units, 33 grinding units, 1 clinkerisation unit, and 8 bulk packaging terminals. Over the past two decades, its capacity has grown 11x, far outpacing the industry growth of 4x, according to an earlier statement by the company.
According to UltraTech’s recent investor presentation, the company operates 25 MTPA in south India and plans to add another 10 MTPA by FY27. This is excluding the capacity of 10.75 MTPA expected from the Kesoram Industries deal.
The company said on Sunday that the latest deal provides it an opportunity to evaluate the optimisation/or deferment of the existing capacity expansion plans in the southern market, given the ready-to-use assets of India Cements.
UltraTech’s latest acquisition will put another 14.5 MTPA capacity between UltraTech and its closest competitor, Adani Cement. Adani-promoted cement entities – Ambuja Cements-ACC — operated 77 MTPA as of March, excluding acquisitions which are underway.
By 2028, UltraTech plans to operate 200 MTPA, while Adani’s plan is for 140 MTPA.