After UltraTech Cement acquisition of Century Textiles, a deal which pegs the enterprise value of Century Textiles’ cement business at above Rs 8,600 crore, analysts say that the valuations are attractive for the Aditya Birla Group firm. According to CLSA, with this deal, UltraTech Cement will cross the 100 million tonne capacity. Notably, UltraTech is slated to get three integrated cement units of Century Textiles in Madhya Pradesh, Chhattisgarh and Maharashtra with a total capacity of 11.4 million tonnes per annum and a 2 MTPA grinding unit in West Bengal.
According to the details of the deal, shareholders of Century Textiles will get one equity share of UltraTech for every eight equity shares held. According to the company’s statement, the transaction is expected to be completed in the next six to nine months once regulatory approvals come in. CLSA notes that an approval from the majority of minority investors will be required for the deal.
“The capacity share will rise to 28% in Central, 18.5% in East and 17.8% in the West,” the global research firm said. UltraTech said that that the company operations will be strengthened by economies and scale; creation of efficiency by reducing time to market, enhancing competitiveness as well as customer service.
Further, the company also seeks to expand its presence in the Western and Southern markets and strengthen its presence in the Eastern and Central markets. CLSA has upgraded the shares to ‘Buy’ from ‘Outperform’ earlier. CLSA has a share price target of Rs 5,000 on the shares of the company. UltraTech Cement shares were trading at Rs 3,729 on Tuesday morning. Another global brokerage firm Macquarie has maintained an ‘Outperform’ rating on the share with a target price of Rs 4,950. According to the firm, increase in efficiency and brand premium should make the deal EPS accretive.