Shares of UltraTech and India Cements surged up to 3% in opening trade on Monday after the Aditya Birla Group flagship announced to buy a major stake in the Chennai-based company. A month after acquiring 22.77% stake in India Cements, the country’s largest cement manufacturer has proposed to acquire an additional 32.72% stake in the company from the promoters & their associates, taking the total shareholding to 55.49%. The floor price for the deal is ₹390 per share, amounting to ₹3,954 crore, and the transaction is subject to receipt of statutory and regulatory approvals.
Cheering the news, shares of India Cements jumped 3% to hit a fresh all-time high of ₹385.50 on the BSE, while UltraTech Cement shares rose 1.3% to ₹11,830 in early trade today. The market capitalisation of India Cements climbed to ₹11,610.30 crore, while that of UltraTech increased to ₹3.4 lakh crore.
In the last one month, India Cements shares have risen over 32% post deal with UltraTech, with the share price hitting multiple new highs. The smallcap cement stock has more than doubled in less than two months, from its 52-week low of ₹172.55 touched on June 4, 2024.
In a regulatory filing last evening, UltraTech informed exchanges that its board approved the purchase of a 32.72% equity stake of the promoters and their associates in India Cements. Post signing of SPA and obtaining regulatory approvals, UltraTech will pay ₹3,954 crores at ₹390 a share for buying 32.72% stake in India Cements from the promoters & their associates.”
As per the release, stake buying will trigger a mandatory open offer at ₹390 per share, which will be done subsequently after obtaining all regulatory approvals. The company will make an open offer for up to 8.05 crore equity shares, constituting 26% of the equity share capital of India Cements, from the public shareholders.
“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,” says Kumar Mangalam Birla, Chairman, Aditya Birla Group.
Last month, UltraTech made a financial investment in India Cements to acquire 22.77% equity from ace investor Radhakishan Damani, the founder of the hugely popular DMart chain of hypermarkets, at a price of ₹268 per share. Post this deal, the promoter group had approached UltraTech to sell their holding in the company, and the company found it appropriate to acquire their stake in the company, the release says.
As part of the deal, UltraTech inked a share purchase agreement on July 28, 2024, for the acquisition of up to 6.81 crore equity shares worth ₹2,656.69 crore, representing 21.98% of the equity share capital of India Cements, from EWS Finance & Investments Private Limited, N Srinivasan, Chitra Srinivasan, Rupa Gurunath, and S.K. Asokh Baalaje.
Besides, the Aditya Birla Group company will be another 1.99 crore equity shares worth ₹778.20 crore, representing 6.44% of the equity share capital, from Rupa Gurunath, Trustee of Security Services Trust and Rupa Gurunath, Trustee of Financial Service Trust who are members of the promoter group of India Cements.
The company will buy another 1.33 crore equity shares for ₹519.35 crore, representing 4.30% of the equity share capital, from Sri Saradha Logistics Private.
Formed in 1946, India Cements is one of the leading cement manufacturers in South India with established presence in all five states in the region. It manufactures cement (Ordinary Portland Cement and Portland Pozzolana Cement in 37:67 mix) under the Coromandel, Sankar and Raasi brands.
Tushar Chaudhari, Research Analyst, Prabhudas Lilladher, says that the deal can be mutually beneficial for both companies as UltraTech can work of a strategic cement supply agreement to gain market share in undersupplied AP and Telangana belt and ICL’s financial performance can also improve as volume improves.
India Cements has 14.5 million tonnes per annum (MTPA) cement capacity (5 mtpa in Telangana, 6 mtpa in Tamil Nadu, 2.1 mtpa in AP, and 1.5 mtpa in Rajasthan) along with 11.13 mtpa clinker capacity; which complements well with UltraTech’s Southern capacities if it will be able to crack a deal with ICL promoters in future. UltraTech has 2 mtpa in Telangana, 5 mtpa in Tamil Nadu, 10.6 mtpa in AP.
A $8.4 billion building solutions company, UltraTech is the third largest cement producer in the world, outside of China, with a total grey cement capacity of 154.86 MTPA.
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