Ambuja Cements climbs 2% after planning to buy 46.8% stake in Orient Cement

Ambuja Cements will acquire a 46.8 per cent stake in Orient Cement. The transaction will happen at an equity value of Rs 8,100 crore, or Rs 395.4 per share

Ambuja Cements shares advanced 2 per cent in Tuesday's trade on the NSE to register an intraday high of Rs 583.25 per share. The stock rose after the Adani Group-owned cement company said it would acquire a 46.8 per cent stake in Orient Cement, at a per share price of Rs 395.4 each.

However, Ambuja Cement stocks pared their gains soon, and at around 11:00 AM, they were down 1.36 per cent at Rs 564.15 per share on NSE, amid a weak market sentiment.

In comparison, the NSE Nifty was down 0.28 per cent at 24,711.05 around the same time. The market capitalisation of the company around the time stood at Rs 1,41,050.77 crore. 

The company will acquire 7,76,49,413 shares of Orient Cement at Rs 395.4 per share, representing a 37.9 per cent stake in the company, from the promoters and related entity, according to its exchange filing.

It has also signed another share purchase agreement to acquire another 1,82,23,750 shares of the company, representing 8.90 per cent of the existing share capital, from certain public shareholders of the company. 

As per the company's exchange filing, the transaction has triggered an open offer from Ambuja Cements to acquire another 26 per cent stake in Orient Cement, from public shareholders.

For that transaction, Ambuja Cements will roll out an open offer to acquire up to 5,34,19,567 equity shares, constituting 26 per cent of the Expanded Share Capital (as defined in the PA), at a price of Rs 395.4 per equity share from the public shareholders of Orient Cement. 

According to its exchange filings, the transaction will happen at an equity value of Rs 8,100 crore, or Rs 395.4 per share. 

Under the proposed deal, Ambuja Cement will acquire operational cement capacity of 8.5 MTPA (million tonne per annum), and 8.1 MTPA of cement capacity in ready to execute projects, along with a limestone mine in Rajasthan which can support an additional 6 MTPA cement capacity in North India. This will take Adani Cement's total operational capacity to 97.4 MTPA.

The acquisition will also increase the Adani group company's pan India market share by 2 per cent, along with an improvement in return on capital employed (ROCE). The company has set a target of more than 15 per cent ROCE on the investment. 

Moreover, the acquisition is expected to further strengthen Ambuja Cements's balance sheet as Orient Cement is almost debt free. 

“This timed acquisition marks another significant step forward in Ambuja Cements’ accelerated growth journey, increasing cement capacity by 30 MTPA within two years of Ambuja’s acquisition,” said Karan Adani, director, Ambuja Cements.

Adani added: "By acquiring Orient Cement, Ambuja is poised to reach 100 MTPA cement capacity in FY25. Orient Cement's assets are highly efficient, equipped with railway sidings, and well supported by captive power plants, renewable energy, WHRS, and AFR facilities."

Ambuja Cements is one of the leading cement manufacturing companies in India, known for its commitment to sustainability and quality. Founded in 1983, it has played a significant role in the construction industry by providing high-quality cement for various infrastructure projects.

In May 2022, the Adani Group acquired a controlling stake in Ambuja Cements. 

That apart, Orient Cement is an Indian cement manufacturing company that is a part of the C.K. Birla Group. Established in 1979, it has grown to become a prominent player in the Indian cement industry, known for producing high-quality cement products.

In the past one year, Ambuja Cements shares have gained 32.7 per cent, compared to the Nifty 50's rise of 27 per cent during the same period.