UltraTech Cement Pays High Premium Of $120 A Tonne In India Cements Stake Purchase

UltraTech Cement Ltd.'s latest stake acquisition of 32.72% from the promoters of India Cements values the deal at steep premium of $120.76 per tonne, as per NDTV Profit calculations.

This 32.72% acquisition of India Cements stands at a higher price paid by the company in its previous financial investment in India Cements. The acquisition cost in the first deal stood at $90 per tonne for an asset which would need immediate capex to improve efficiency and working capital.

Post this acquisition, UltraTech Cement's will have majority shareholding in India Cements at 55.52%. The blended acquisition cost (EV/tonne) excluding the open offer portion for of all UltraTech Cement's investments in India Cements stands at $103 per tonne.

For the 32.72% acquisition of India Cements approved today, UltraTech Cement Ltd. will pay Rs 3,954 crore at Rs 390 per share for the promoter stake, and will make an open offer at Rs 390 per share to minority shareholders. It is key to note that the cost per share stands 4.8% higher than India Cement's closing stock price as of Friday at Rs 372.

Previously, UltraTech had stated that it was a financial investment in India Cements to acquire a total 22.77% equity at a price of Rs 268 per share in June 2024.

During the previous financial investment, UltraTech Cement acquired 19.44% stake in India Cements at Rs 267 a share, and another 3.4% stake at Rs 285 per share. Radhakishan Damani and his associates, who previously held close to 21% stake, were among the sellers in the secondary market deal, according to disclosure made to the stock exchange..

The current transaction values the acquisition of all UltraTech Cement's investments in India Cements at an Enterprise Value per tonne of $103 per tonne.

As of Q1FY25, UltraTech Cement had a total capacity of 157 million tonne per annum.

India Cements has a total capacity of 14.45 million tonne per annum of grey cement. Of this, 12.95 million tonnes per annum is in the south region of India, particularly Tamil Nadu, which enables UltraTech to increase its market share in the south- which stood at 11% as of December, 2023.

1.5 million tonne per annum capacity is in Rajasthan or the western region of India, where UltraTech Cement had 37% market share as of December 2023.

As per brokerage Emkay Research, acquisition of Kesoram and further acquisition of India Cements, along with the 15 million tonne per annum ongoing capacity expansions stand to solidify the company's presence in the highly fragmented southern markets. Post the completion of the Phase II/III expansion and given the announced acquisitions, the brokerage anticipate UltraTech’s capacity market share in the South and Pan-India to improve by 15% and 5%, respectively to 26 and 27% by FY27.