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Cement major UltraTech’s stock fell by 6.36 per cent on Thursday as investors sold the Aditya Birla Group company's shares over its plan to bid for the global assets of Holcim and Lafarge.
The stock fall wiped off company’s market value by Rs 4,300 crore to Rs 63,380 crore even as the BSE Sensex was down by 1.33%.
UltraTech is planning to bid for cement plants Holcim and Lafarge said they would sell as part of their merger on July 7 this year. A divestment committee set up by both companies has drawn up a list of plants that need to be sold to comply with antitrust regulations.
Holcim and Lafarge will sell cement plants in Austria, France, Germany, Hungary, Romania, Serbia and the UK. The Lafarge-Holcim group will have annual sales of $44 billion. The plants to be sold generate $4.4 billion in sales and employ 10,000 people across the world.
“The acquisition may entail a price tag of up to euro 7 billion ($8.8 billion), which is almost equivalent to Ultratech’s enterprise value. A potential increase in leverage to fund the asset acquisition and exposure to new and possibly less lucrative markets aside, the valuations are rich,” said Kotak analysts Murtuza Arsiwalla and Arun Bagaria.
An analyst with a foreign brokerage said investors were concerned over the funding of the bid. “Most Indian companies’ experience with overseas acquisitions has not been good. So we have to wait for details,” the analyst said, asking not to be named.
Analysts also said the acquisition might take away the comfort of UltraTech’s under-leveraged balance sheet, with the net debt to equity ratio rising sharply from 0.3 to 2.4-3.2. News reports said UltraTech wanted to retain Holcim’s and Lafarge’s plants in Brazil and India and sell plants in the US and Europe. But this has not impressed investors.
