Ambuja's Bold Move: Acquiring Orient Cement for ₹8,100 Crore and Expanding Stake!

Ambuja Cement has announced its intention to acquire Orient Cement Ltd for Rs. 8,100 crore. This transaction will involve an open offer to secure an additional 26% stake in the company. 

Ambuja Cement Share Price

Upon completion, this acquisition is expected to augment Ambuja's cement production capacity by 30 million tonnes per annum (MTPA), enabling the company to achieve 100 MTPA by the fiscal year 2025. 

Furthermore, this strategic move is anticipated to strengthen Ambuja's market position in its key operational regions.

Ambuja Cement declared on Tuesday its intention to purchase a 46.8% stake in Orient Cement Ltd (OCL) for an equity valuation of Rs 8,100 crore. 

This strategic acquisition aims to enhance its cement production capacity to 100 million tonnes per annum (MTPA) by the fiscal year 2025 and to increase its market share across India by 2%.

The cement conglomerate has announced an open offer to purchase an additional 26% stake in the company. 

According to the provisions outlined in the SAST (Substantial Acquisition of Shares and Takeovers) Regulations, the completion of the Open Offer is expected within a timeframe of 3 to 4 months. 

The offer price has been set at Rs 395.40 per equity share, a figure established under the SAST Regulations, as disclosed by the company in a filing with the stock exchange.

Ambuja is set to purchase a 46.8% stake in OCL from its existing promoters and select public shareholders. This acquisition will be entirely financed through internal resources.

Karan Adani, Director of Ambuja Cements, stated, “This strategic acquisition represents a crucial advancement in Ambuja Cements’ rapid growth trajectory, enhancing cement production capacity by approximately 30 MTPA within two years following Ambuja’s acquisition.”

Analyzing the strategies employed by Adani to establish its dominance in the industry.

- Last year, Adani Group acquired a crucial component of its infrastructure strategy by purchasing Ambuja Cements and ACC Limited for $10.5 billion from Switzerland's Holcim, financed through debt.

This acquisition positioned Adani Group as the second largest cement producer in India, following UltraTech.

- The integration of Adani Group's coal, power, and logistics operations with its cement business presents significant opportunities for synergy, which is expected to lead to a substantial decrease in cement production costs.

- This strategic move not only enhances Adani's presence in the Indian infrastructure and materials sector but also aligns with its broader business objectives by leveraging existing resources for improved efficiency.

- Adani has been depending on sustained government investment in infrastructure development in India over the past few decades, with cement being a crucial element of this initiative. 

- Despite the competitive nature of the industry, Adani proceeded with the acquisition of Ambuja and ACC, anticipating synergistic advantages and complementary benefits from his existing enterprises. 

- In August of this year, Adani's Ambuja Cements acquired Sanghi Industries in Gujarat for an enterprise value of Rs 5,000 crore, enhancing its production capacity to 6.1 MTPA. 

 

- The acquisition of Sanghi Industries was strategically intended to broaden market presence and fortify the product portfolio.  

- Sanghi Industries operates an integrated manufacturing facility located in Sanghipuram, which is recognized as India's largest single-location cement and clinker production unit by capacity, situated in the Kutch district of Gujarat. 

- Over the past four years, cement prices experienced a compounded annual growth rate of 4%, culminating in a peak of approximately 391 rupees for a 50-kg bag.  

- Crisil anticipates that increasing competitive pressure and declining input costs will alter this upward trajectory.  

- The agency projects that cement prices may decrease by 1-3% in the ongoing financial year.