Intensifying the battle against Adani group, UltraTech Cements, an Aditya Birla Group company, has acquired 23 per cent stake in rival India Cements for ₹1,885 crore. This comes two weeks after Adani Group-owned Ambuja Cements acquired Penna Cement Industries Ltd (PCIL) for ₹10,422 crore to strengthen its market share in South India.
The non-controlling financial investment Ultratech was made at ₹267 per share and approved by the company’s board on Thursday.
As of March, promoters hold 28 per cent stake in India Cements and resident individuals own 39.33 per cent stake in India Cements. Of these, Radhakishan Shivkishan Damani and Gopikishan Shivkishan Damani collectively hold 22.78 per cent, as per the company’s shareholding data.
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In April, UltraTech acquired India Cements’ grinding unit with capacity for 1.1 million tonnes per annum and railway sidings at Parli in Maharashtra for ₹315 crore.
The country’s largest cement company UltraTech plans to invest ₹32,400 crore over the next three years to increase its manufacturing capacity to 200 MTPA from 153 MTPA. UltraTech will add another 35.5 MTPA through ongoing expansion at 16 locations. It is also in the process of finalising the previously announced acquisition of Kesoram Cement’s 10.75 MTPA through share-swap deal.
The second largest cement producer Ambuja Cements along with its subsidiary has 89 MTPA after its recent acquisition. The Adani Group company plans to double its capacity to 140 MTPA by 2028.
Late last year, Ambuja Cements had acquired 6 MTPA of Sanghi Industries for ₹5,185 crore and topped it up with the acquisition of Penna Cements’ 14 MTPA capacity early this month for ₹10,422 crore.
Similarly, Shree Cement plans to increase its capacity to 80 MTPA from 56 MTPA by setting up 13 new plants by 2028. The company will start production from five of these plants in this fiscal.
Projecting a consolidation in the cement industry, ICRA estimates that the market share of the top five cement companies (UltraTech Cement, Adani Group, Shree Cement, Dalmia Cement and Nuvoco Vistas) to increase to 55 per cent by next March against 45 per cent as of March, 2015.
Anupama Reddy, Vice President, Corporate Ratings, ICRA said while organic growth is expected to continue in the medium term, cement companies are preferring the inorganic route to boost capacities rapidly.
There were 15 M&As in the last nine years in the cement industry with the average cost of $80 a tonne against greenfield cement plant capex of $120 a tonne, she said.
Shares of UltraTech Cements shares were up 5 per cent to ₹11,715 while that of India Cements increased 11 per cent to ₹292 on Thursday.