UltraTech Cement Plans to Acquire 32.72% Stake in India Cements for Rs 3,954 Crore

UltraTech Cement, the flagship company of the Aditya Birla Group, has announced its plan to acquire a 32.72% stake in India Cements from the promoters and their associates for Rs 3,954 crore. This strategic acquisition aims to significantly bolster UltraTech’s presence in the highly competitive and rapidly growing Southern cement market, particularly in Tamil Nadu.

The move is part of UltraTech's broader strategy to expand its footprint in the Southern region of India, where it currently has a limited presence. This acquisition follows the Adani Group’s recent purchase of Hyderabad-based Penna Cement for Rs 10,422 crore, which has notably strengthened its position in the cement industry by adding an additional 14 million tonnes per annum (MTPA) capacity.

With an installed capacity of 154.86 MTPA of grey cement, UltraTech Cement stands as a leader in the Indian cement industry. The company has set an ambitious target to increase its capacity to 200 MTPA, aiming to position itself among the largest cement companies globally. The acquisition of India Cements is a crucial step towards achieving this goal.

The board of UltraTech has approved the acquisition of the 32.72% stake at Rs 390 per share, as disclosed in a regulatory filing. This deal includes acquiring a 28.42% stake from promoters Srinivasan N, Chitra Srinivasan, Rupa Gurunath, and S K Asokh Baalaje, and a 4.30% share from Sri Saradha Logistics. Additionally, UltraTech has announced a Rs 3,142.35 crore open offer to acquire another 26% share of India Cements from its shareholders. The open offer, priced at Rs 390 per share, represents a 4.1% premium over India Cements' closing price of Rs 374.60 last Friday.

Upon completion of the Rs 3,954 crore deal, UltraTech’s stake in India Cements will surpass 55%, necessitating a mandatory open offer as per Securities and Exchange Board of India (SEBI) regulations. The total investment, including the open offer, could reach Rs 7,096.35 crore if fully subscribed. This acquisition will grant UltraTech sole control over India Cements, making it a subsidiary of UltraTech, though there will be no immediate change in the management of India Cements until the acquisition is finalized.

The acquisition is expected to provide UltraTech with operational efficiencies by leveraging ready-to-use assets, thus reducing time to market compared to greenfield projects. It will also enable UltraTech to optimize its capacity expansion plans in the Southern market. Aditya Birla Group Chairman Kumar Mangalam Birla expressed enthusiasm about the deal, emphasizing that it enhances UltraTech’s ability to serve Southern markets more effectively and accelerates the company’s path to exceeding 200 MTPA capacity. "Every investment in a core sector like cement accelerates economic activity and drives progress," Birla stated.

The primary acquisition and the open offer are anticipated to be completed within six months, pending regulatory approvals from the Competition Commission of India (CCI). Currently, UltraTech operates only one integrated unit in Tamil Nadu, Reddipalayam Cement Works, with a capacity of 1.4 MTPA.

UltraTech Cement's acquisition of a significant stake in India Cements represents a strategic move to reinforce its presence in the Southern market and boost its overall capacity.