New Delhi: UltraTech Cement, the flagship company of the Aditya Birla Group, is acquiring 32.72 per cent stake in India Cements from the promoters and their partners in a deal worth Rs 3,954 crore. With this, the company aims to expand its position in the highly competitive and fast-growing cement market in the south, particularly Tamil Nadu.
In addition, Ultratech has announced an open offer of Rs 3,142.35 crore to acquire an additional 26 percent stake in India Cements Ltd (ICL) from its shareholders.
The announcement comes a month after Adani Group, the world’s second-largest cement producer, this month announced the acquisition of Hyderabad-based Penna Cement for Rs 10,422 crore, adding 14 MTPA to its capacity, taking it to 93 MTPA.
With an installed capacity of 154.86 million tonnes per annum (MTPA) of grey cement, UltraTech Cement is the leader in the Indian cement industry. It has ambitions to become one of the largest cement companies in the world and has set a target of 200 MTPA.
However, Adani, which entered the cement sector in September 2022 after acquiring Ambuja Cement from Swiss company Holcim for cash proceeds of $6.4 billion (around Rs 51,000 crore), is also on the rise.
Adani has set a target of reaching 140 MTPA capacity by FY28 and is expanding aggressively organically through capacity addition at its existing units and also going for acquisitions. Through Ambuja, it also controls ACC Ltd and acquired MyHome Industries and Sanghi Industries in 2023.
The board of directors of Aditya Birla company has approved the acquisition of 32.72 percent stake from the promoters and their partners at Rs 390 per share, according to a filing by UltraTech with the regulator on Sunday.
The company has entered into share purchase agreements for 28.42 per cent stake from promoters Srinivasan N, Chitra Srinivasan, Rupa Gurunath and SK Asokh Baalaje and 4.30 per cent stake from Sri Saradha Logistics.
Upon completion of the Rs 3,954 crore deal, UltraTech’s stake in India Cements Ltd (ICL) will increase to over 55 per cent, making it obligated to respond to the public offer as per Sebi rules.
UltraTech’s board of directors has also approved an “open offer for up to 8.05 crore equity shares, representing 26 per cent of Target’s equity share capital, at a price of Rs 390 per equity share from Target’s public shareholders,” the report said.
The price UltraTech is offering is 4.1 per cent higher than ICL’s closing share price of Rs 374.60 last Friday. If fully subscribed, the open offer will cost UltraTech Rs 3,142.35 crore.
“After signing SPA and obtaining regulatory approvals, UltraTech will pay Rs 3,954 crore at Rs 390/share for acquisition of 32.72 per cent stake in India Cements from the promoters and their associates. This will trigger a mandatory open offer of Rs 390/share. The open offer will be made subsequently after obtaining all regulatory approvals,” the company said in a statement.
Following the acquisition of the promoter’s stake and the approval of the CCI, “the company will have full control over ICL and become a promoter of ICL,” the press release said.
In June, UltraTech acquired 23 percent stake in ICL. It had acquired Damani group’s stake in India Cements Ltd (ICL) through two block deals valued at around Rs 1,900 crore.
“The proposed transaction is therefore an attempt to expand the company’s footprint and presence in the highly fragmented, competitive and fast-growing southern market of the country, particularly Tamil Nadu, where the company has a limited presence,” UltraTech said.
According to UltraTech, the operational efficiencies resulting from purchasing turnkey assets will reduce time to market compared to greenfield projects.
It also provides UltraTech with the opportunity to evaluate the optimization of the company’s existing capacity expansion plans in the southern market, given the target group’s ready-to-use assets, the company added.
UltraTech, however, added that the proposed transaction is subject to the approval of the Competition Commission of India.
On the expected time for completion of the acquisition, UltraTech said: “Both the primary acquisition (from the promoters) and the Open Offer are expected to close within six months, subject to the regulatory approvals referred to above.”
UltraTech currently has only one integrated unit in Tamil Nadu – Reddipalayam Cement Works, with a capacity of 1.4 MTPA. Moreover, there is a shortage of limestone
According to Kumar Mangalam Birla, Chairman, Aditya Birla Group, India Cements’ opportunity is promising as it enables UltraTech to serve the southern markets more effectively and accelerates its journey towards a capacity of over 200 MTPA.
“UltraTech Cement’s investments over the years, both organic and inorganic, are designed to help India emerge as a global champion in construction solutions. Every investment in a core sector like cement accelerates economic activity and drives progress.”
“These investments have also enabled India’s rural infrastructure upgrade, bolstering our country’s growing need for housing, roads and other vital infrastructure. This, in turn, has had a huge impact on people’s lives and aspirations,” he added.
ICL has a total group capacity of 14.45 MTPA of grey cement. Of this, 12.95 MTPA is in the south and 1.5 MTPA in Rajasthan.
This post was last modified on July 28, 2024 4:37 pm
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