The Adani group has announced a major reorganisation of its cement business. The group plans to bring ACC and Orient Cement into Ambuja Cements, making Ambuja the single listed company for its cement operations.
Motilal Oswal said this move is meant to make the group’s cement business easier to manage, reduce overlaps, and bring all profits under one roof. After reviewing the plan, the brokerage has maintained a Buy rating on Ambuja Cements with a target price of Rs 750. This implies 39% upside from current levels
Why Motilal Oswal sees value in Ambuja Cement
According to Motilal Oswal, Ambuja Cements has been performing steadily over the past few quarters. The brokerage pointed out that the company has been earning more than Rs 1,000 per tonne of cement for three quarters in a row. This means costs are under control and pricing has remained stable.
The brokerage house expects Ambuja’s annual revenue to rise from about Rs 40,400 crore in FY26 to nearly Rs 51,400 crore by FY28. Motilal Oswal also expects operating profit margins to improve gradually during this period, helped by higher volumes and lower costs.
Based on these expectations, the brokerage has valued Ambuja at Rs 750 per share.
What ACC shareholders get under the merger
Under the proposed scheme of amalgamation, shareholders of ACC will receive 328 equity shares of Ambuja Cements with a face value of Rs 2 for every 100 equity shares of ACC with a face value of Rs 10.
Motilal Oswal noted that this exchange ratio was almost in line with ACC’s market price at the time the merger was announced. Because of this, the brokerage described the transaction as largely neutral for ACC shareholders in valuation terms.
However, the brokerage firm added that the merger is positive for Ambuja shareholders because ACC has historically traded at a much lower valuation. According to Motilal Oswal’s data, Ambuja trades at around 15.4 times FY27 estimated EV/EBITDA, while ACC trades at roughly 7.1 times, which creates a valuation gap that disappears once both businesses sit under Ambuja.
What Orient Cement shareholders get
For Orient Cement, the deal offers 33 Ambuja shares for every 100 Orient shares held.
According to Motilal Oswal Financial Services, these values Orient Cement at about a 9% premium compared to its market price at the time of the announcement. The brokerage said this makes the deal favourable for Orient Cement shareholders.
What happens to Sanghi Industries and Penna Cement
Motilal Oswal also referred to earlier announcements involving Sanghi Industries and Penna Cement.
- Sanghi Industries shareholders will get 12 Ambuja shares for every 100 shares held
- Penna Cement shareholders will receive Rs 321.5 per share in cash
Once all these deals are completed, Motilal Oswal estimates that Ambuja will issue additional shares, leading to about 12% dilution. The promoter group’s holding is expected to fall from around 68% to about 61%.
Motilal Oswal on Adani Group’s rationale for consolidating cement business
According to Ambuja Cement’s media release, the goal is to create a single nationwide cement company. The group plans to raise cement capacity to 155 million tonnes by FY28 from 107 million tonnes.
Motilal Oswal explained that running one company instead of many will reduce costs related to marketing, branding, transport, and administration. The brokerage estimates that this can add at least Rs 100 per tonne to operating profit.
The report also said Ambuja may temporarily take on debt during heavy expansion over the next two years. However, Motilal Oswal expects the company to return to a cash surplus position by FY28 as new capacity starts generating profits.
Motilal Oswal described the merger of Ambuja Cement, ACC, Orient Cement, Sanghi Industries, and Penna Cement as a clean and logical consolidation of the Adani group’s cement business.