In a strategic move to strengthen its position in the cement industry, Ambuja Cements, controlled by the Adani Group, has announced its acquisition of a 47% stake in Orient Cement from Chandra Kant Birla and his family for ₹3,791 crore. This acquisition is part of Ambuja’s broader strategy to surpass UltraTech Cement, owned by Kumar Mangalam Birla, and secure the top spot in the market.
Details of the Acquisition
As part of the acquisition process, Ambuja will also extend an open offer to acquire an additional 26% stake from Orient’s public shareholders for a total of ₹2,112 crore, complying with India’s takeover regulations. This marks Ambuja’s fifth acquisition since its takeover by Adani in September 2022, following its purchase of Hyderabad-based Penna Cement earlier this year.
Capacity Expansion and Market Positioning
Orient Cement operates two plants in Telangana and Karnataka, as well as one in Maharashtra. The deal is expected to enhance Ambuja’s cement capacity by 8.5 million tonnes, bringing its total capacity to 97 million tonnes. Ambuja aims to reach a target capacity of 140 million tonnes by 2028, while UltraTech currently boasts a capacity of over 180 million tonnes and plans to expand to 200 million tonnes by 2027.
Strategic Shift for CK Birla Group
The decision to sell Orient aligns with the CK Birla Group’s strategy to reallocate capital and focus on core business areas. The $3 billion conglomerate recently expanded its presence in the healthcare sector by acquiring two fertility chains, BabyScience and ARMC, increasing its network to 50 clinics across India. Additionally, the group acquired Topline, a prominent pipes and fittings brand in East India, to bolster its home and building materials portfolio.CK Birla, chairman of the CK Birla Group, expressed confidence in the Adani Group’s capability to drive growth at Orient Cement. He stated, “We are confident that the Adani Group, with its strong focus on cement and infrastructure, is the ideal new owner to drive continued growth at Orient Cement for our people and stakeholders.”
Financial Implications
Ambuja expects its market share to increase by 2% following the Orient deal, offering ₹395.4 per share for the target company. However, Orient’s stock closed at ₹343 on the BSE on Tuesday, raising concerns among analysts about regulatory approval for the deal from the Competition Commission.Ambuja plans to finance this acquisition through internal accruals, having amassed over ₹23,000 crore in cash after Adani infused funds into the cement company through warrants converted into equity shares. The acquisition is anticipated to complement Ambuja’s existing footprint in cement production while reducing logistics costs and enhancing market share.
Conclusion
The acquisition of Orient Cement represents a significant step for Ambuja Cements as it seeks to solidify its position in India’s competitive cement market. With plans for substantial capacity expansion and strategic investments in key areas, Ambuja is well-positioned for future growth as it aims to challenge UltraTech Cement’s dominance.
Disclaimer: This article is intended for informational purposes only and does not constitute financial advice or endorsements regarding specific companies or investment opportunities. Readers should conduct their own research or consult with financial advisors before making investment decisions.
