Ambuja Cements Ltd, a subsidiary of the Adani Group, has announced its plans to acquire a 46.8% stake in Orient Cement Ltd for Rs 8,100 crore. The acquisition will involve purchasing shares from Orient Cement’s promoters and certain public shareholders at a price of Rs 395.4 per share. This transaction will occur in two phases: the first phase will see Ambuja acquiring a 37.9% stake from the promoters, while the second phase will involve an additional 8.9% acquisition from select public shareholders. Following these acquisitions, Ambuja intends to launch an open offer for 26% of Orient Cement’s expanded share capital at the same per-share price.
This acquisition is expected to significantly enhance Ambuja Cements’ production capacity by adding up to 16.6 million tonnes per annum (MTPA) of cement capacity, which includes 8.5 MTPA that is already operational under Orient Cement. The deal aligns with Ambuja’s goal to surpass 100 MTPA of cement capacity by FY25, with a long-term target of reaching 140 MTPA by 2028. A notable advantage of the acquisition is Orient Cement’s potential for expansion in northern India, particularly due to its valuable limestone reserves in Rajasthan, which could allow for an additional 6 MTPA of capacity in the future.
Moreover, the acquisition expands Ambuja’s operational footprint across key markets in South and West India, where Orient currently operates plants in Telangana, Karnataka, and Maharashtra. This expanded presence is expected to enhance logistics efficiency and reduce transportation costs for Ambuja, ultimately increasing its pan-India market share by approximately 2%.
Ambuja has confirmed that the acquisition will be fully funded through internal accruals, enabling the company to maintain its debt-free status. Karan Adani, Director of Ambuja Cements, stated that acquiring Orient Cement positions the company well to achieve its 100 MTPA target by FY25, aligning with its accelerated growth strategy. CK Birla, a promoter of Orient Cement, noted that the sale aligns with the group’s strategy of reallocating capital towards more consumer-centric and technology-driven businesses. Amita Birla, another key promoter, expressed confidence in the acquisition’s positive impact on employees and stakeholders, highlighting its long-term strategic benefits.
Following the announcement, the stock market reacted positively, with shares of Ambuja Cements trading with minor gains of 0.60% at Rs 575 per share as of 9:45 am on the National Stock Exchange (NSE). Over the past year, Ambuja’s stock has delivered a robust 32% return. Similarly, shares of Orient Cement saw a modest gain of 0.70%, trading at Rs 355 per share, with the stock delivering impressive returns of nearly 75% over the last year.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. The acquisition details mentioned are subject to regulatory approvals and market conditions. Readers are encouraged to conduct their own research and consult with a financial advisor before making any investment decisions. The performance of stocks mentioned may vary and past performance is not indicative of future results.
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