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Shares in UltraTech Cement Ltd rose as much as 4.2 per cent to Rs 4,019. It posted its biggest intra-day percentage gain since April 19.
Century Textiles and Industries on Sunday approved the demerger of its cement business into UltraTech in an all-stock deal. Shareholders of Century Textiles will get one share of UltraTech for every eight shares held; UltraTech will absorb debt of around Rs 3,000 crore. Analysts at Macquarie say UltraTech's capacity would increase by 14 per cent to 110 million tonnes with this acquisition and extend its leadership in West, Central and East.
Macquarie has maintained “outperform” rating. While trailing earnings suggest 4-5 per cent EPS dilution for UltraTech, an increase in efficiency and brand premium should make the deal EPS accretive, according to Macquarie.
Acquired assets are close to existing assets of UltraTech and so do not offer a new market to UltraTech, Credit Suisse analysts write, keeping “underperform” rating.
However, synergies exist from higher pricing of UltraTech brand, procurement benefit from higher economies of scale and logistical advantages by redistributing Century output, Credit Suisse said.
Shares in Century Textiles plunged as much as 8.6 per cent to Rs 975.05, their lowest since March 15, 2017.
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