Ambuja Cements shares are set to draw attention on Friday following the Adani Group’s announcement to acquire Penna Cement Industries Ltd (PCIL) for ₹10,422 crore.
Ambuja Cements will purchase 100% of PCIL’s shares from the Pratap Reddy family, funding the acquisition entirely through internal resources, according to a regulatory filing on Thursday.
PCIL boasts a cement capacity of 14 MTPA, with 10 MTPA operational and the remaining 4 MTPA under construction at Krishnapatnam and Jodhpur, expected to be completed within 6 to 12 months. Additionally, surplus clinker at the Jodhpur plant will support an extra 3 MTPA cement grinding capacity.
Analysts view this acquisition as a strategic move to strengthen Ambuja Cements’ presence in the southern market and enhance its growth prospects, maintaining a positive outlook on the company’s shares.
Value Accretive Acquisition
Dharmesh Shah, Research Analyst at Emkay Global Financial Services, values the deal at a favorable $89 per tonne, potentially dropping to $79 per tonne with additional grinding capacity. Shah believes the acquisition will boost Ambuja’s market share by 200 basis points nationally and 800 basis points in the South, helping the company reach its capacity targets of 113 MTPA by FY27 and 140 MTPA by FY28. Emkay maintains a ‘Buy’ rating with a target price of ₹700 per share by March 2025.
Antique Stock Broking also finds the implied valuation for the clinker-backed capacities favorable at $85 per ton. While awaiting regulatory approvals, they maintain a ‘Buy’ rating with a target price of ₹700 per share based on 17x consolidated FY26 EV/EBITDA. They project a 12% volume CAGR from FY24-26 and expect EBITDA per ton to rise from ₹1,082 in FY24 to ₹1,304 by FY26.
Nuvama Institutional Equities notes PCIL’s liquidity challenges but sees potential for value enhancement similar to Ambuja’s previous acquisitions. They predict increased competition with improved PCIL utilization but appreciate Ambuja’s robust capex plans and cost efficiency measures. Nuvama retains a ‘Buy’ rating with a target price of ₹767 per share based on FY26 EV/EBITDA of 18x.
Ambuja Cements shares have rallied, gaining 13% in the past month, over 18% in the past three months, and more than 27% year-to-date.
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