Adani's Ambuja to acquire 46.8% stake in Orient Cement for Rs 8,100 cr

Adani pips Ultratech, makes open offer for CK Birla firm at Rs 395.40 a share

The Adani group’s Ambuja Cements on Tuesday announced its third acquisition of the ongoing financial year, with a binding agreement to acquire a 46.8 per cent stake in the C K Birla family-owned Orient Cement Limited (OCL) for an equity value of Rs 8,100 crore.

The deal, set to trigger an open offer, will push the Adani group’s cement capacity to 97.4 million tonnes per annum (mtpa) but still behind India’s largest producer, UltraTech Cement, which has a capacity of 150.7 mtpa.

To meet market regulations, Ambuja Cements will make an open offer at Rs 395.40 per share to the public shareholders of OCL. The company, it said, plans to acquire 37.90 per cent from OCL’s promoters and another 8.90 per cent from other shareholders under the share purchase agreement. In addition, a further 26 per cent stake in the expanded share capital pursuant to the open offer.

Orient Cement, in Tuesday's trade, closed at Rs 343.40 per share, down 2.5 percent. 
 

 

Ambuja Cements said it will fund the acquisition from internal accruals.

Orient Cement operates with a clinker capacity of 5.6 mtpa and cement capacity of 8.5 mtpa across southern and western India. Additionally, OCL has 8.1 mtpa of capacity in a “ready to execute” phase, which Ambuja says can be constructed quickly, alongside access to high-quality limestone reserves in Rajasthan.

Ambuja Cements, in a presentation, projected a return on capital employed (ROCE) of over 15 per cent from the investment. Karan Adani, director of Ambuja Cements, described the acquisition as “another significant step forward in Ambuja Cements’ accelerated growth journey, increasing cement capacity by 30 mtpa within two years of Ambuja’s acquisition.”

C K Birla, chairman of Orient Cement and the CK Birla group, described the Adani group as the ideal new owner, stating, “The CK Birla group is continuously reallocating capital to sharpen its focus on consumer-centric, technology-driven and service-based businesses.”

Estimating the deal at $116 per tonne in enterprise value, Mangesh Bhadang, analyst with Centrum Broking, said: “We see this development very positively, not only for Ambuja but also for the cement industry, especially for the southern region.”

This marks Ambuja Cements’ fourth acquisition since its promoter change and the third in this financial year. In August 2023, the company acquired Sanghi Industries, followed by a grinding unit from My Home Industries in April and Penna Cement in June.

Analysts have pegged the OCL acquisition at $116 per tonne, slightly below UltraTech’s deal to acquire India Cements at $120 per tonne. Earlier this financial year, Adani’s Penna Cement acquisition was priced at $89 per tonne, while UltraTech’s purchase of Kesoram Industries was valued at $84 per tonne, according to analyst estimates.

Intensifying competition

In terms of competition, Ambuja Cements’ latest deal will push its total capacity to 97.4 mtpa, including the Penna Cement acquisition. By contrast, UltraTech’s capacity in India stood at 150.7 mtpa as of October, with another 24 mtpa pending approval through its acquisitions of Kesoram Industries and India Cement. Both companies are aggressively expanding, with Ambuja targeting 140 mtpa and UltraTech aiming for 200 mtpa by 2028.

Cement sector consolidation

The top four producers as of September controlled 50 per cent of the 641 mtpa capacity in India, according to CareEdge data. The sector, according to the rating agency, has witnessed 18 major deals since 2014, with nearly 195 mt of capacity changing hands. Notably, 116 mt of these deals have been executed since FY23.

While the hierarchy of the top four — UltraTech, Ambuja, Shree Cement, and Dalmia Bharat — remains unchanged, the latest acquisition will add 8 mtpa to the top four’s dominance. Ambuja expects its market share to rise by 2 per cent following the OCL deal.

According to a report by Emkay in July, the listed cement space had around 71.7 mtpa of potential acquisition targets, including OCL. An additional 45.8 mtpa of capacity could also be targeted in the unlisted segment.