UltraTech Cement, the top cement company by market value, has announced its plan to purchase 32.72% of India Cements, according to a company statement.
After trading on Friday, July 26, UltraTech’s shares closed 2.01% higher at ₹11,679.25, up from ₹11,448.90 the previous day. The shares are expected to open strong on Monday, July 29, boosted by this acquisition.
An unnamed analyst told Mint that the deal was finalized sooner than expected, which is a positive surprise. The competition between UltraTech and the Adani Group to increase market share is intense, and this acquisition strengthens UltraTech’s position.
India Cements has a capacity of 14.5 million tonnes, which adds about 10% to UltraTech’s capacity in India. This deal gives UltraTech a competitive edge in the South Indian market, especially in Tamil Nadu, where India Cements has a significant presence.
With this acquisition, UltraTech will match Ramco Cements in capacity in Southern India. Both companies will have around 12 million tonnes of capacity in the region.
Dharmesh Shah from Emkay Global Financial Services expects UltraTech’s market share in the South to double to about 25% by FY27E.
However, analysts warn that near-term profitability might be low due to a tough pricing environment and increased competition. Cement prices have dropped by 5-6% in the past 6-7 months, impacting profit margins.
Emkay Global predicts profitability will remain low for the next 4-6 quarters because of the acquisition’s low-utilization assets. Despite this, the market outlook for UltraTech and the Adani Group remains positive as they pursue asset acquisitions, potentially leading to more consolidation in the sector.
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