The Cement Companies That Could Be The Next M&A Target

Cement companies trading below enterprise value per tonne valuations of $110-120 could be potential acquisition targets, according to analysts. Companies with capacities of 3-10 million tonne per annum could cash out in this decade of strong growth; where the sector is seeing consolidation, as evident by the market share gains, they said.Based on this, NDTV Profit's analysis suggests that companies like Birla Corp., Sagar Cement Ltd., Orient Cement Ltd., HeidelbergCement India and Ltd., Star Cement Ltd. among others could likely be acquired..India's top five cement companies have increased their combined market share to 62% in the previous financial year from 45% in the financial year-ended March 2015, indicating sector consolidation underpinned by eight mergers and acquisitions since 2023 itself, according to NDTV Profit's analysis.UltraTech Cement Ltd. maintained its leadership position throughout this period. Adani Group (Ambuja Cements Ltd. and ACC Ltd.), Shree Cement Ltd., Dalmia Bharat Enterprises Ltd., and Nuvoco Vistas Corp. were other top players as of FY24.Consolidation is progressing notably in the east and west, ICRA Research said. While the north and central regions were already consolidated in the past, the southern region remains relatively fragmented. .UltraTech Cement Q1 Results: Profit Misses Estimates, Revenue Rises 2%.Over the past nine years, the Indian cement industry has witnessed over 15 mergers and acquisitions, with an average acquisition cost of $80 per million tonne. Setting up an integrated greenfield cement plant typically costs around $110-120 per million tonne, as per ICRA Research. This indicates that the cost savings for cement players stands higher via the inorganic route.In addition to cost advantages, acquiring companies benefit from avoiding longer gestation periods associated with greenfield projects. Acquisitions also provide access to limestone reserves, existing capacity, scale advantages, and quicker market entry..Ambuja Cements Upgraded To 'Buy' By Nomura On Aggressive Capacity Expansion.Bernstein suggests that cement firms with an EV per tonne of less than $110 stand to be potential candidate. Based on this, NDTV Profit's analysis revealed the following:The EV/tonne value for UltraTech Cement, the Adani Group and Shree Cement stand the highest in the sector. These two firms are also the ones leading the consolidation in the industry. Based on current valuations, companies like Dalmia Bharat, Nuvoco Vistas, JK Cement Ltd., Birla Corp, India Cements Ltd., JK Lakshmi Cement Ltd., Sagar Cements, Orient Cement, HeidelbergCement, Star Cement, KCP Ltd., Mangalam Cement Ltd., NCL Industries Ltd., Deccan Cements Ltd. could be potential candidates that could get acquired. But while Dalmia Bharat, Nuvoco Vistas, JK Cement and Birla Corporation do trade at lower EV/tonne—below $110—it is key to note that these companies have capacities over 20 million tonne per annum. Furthermore, they are also one of the top five region-wise market share holders, while other potential candidates are not. Based on the points mentioned above, potential targets are streamlined to the following: India Cements, JK Lakshmi Cement, Sagar Cements, Orient Cement, HeidelbergCement, Star Cement, KCP, Mangalam Cement, NCL Industries, Deccan Cements. Companies with a capacity of 3-10 MTPA could likely cash out this decade, ICRA said. These include Orient Cement, Star Cement, KCP, Mangalam Cement, NCL Industries, and Deccan Cements..In Focus: Did UltraTech Pay Premium For Underinvested India Cements Stake?.Disclaimer: NDTV Profit is a subsidiary of AMG Media Networks Limited, an Adani Group Company.

The Cement Companies That Could Be The Next M&A Target

As the cement industry sees increasing consolidation, these players are likely to get acquired, according to NDTV Profit analysis.

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The Cement Companies That Could Be The Next M&A Target

As the cement industry sees increasing consolidation, these players are likely to get acquired, according to NDTV Profit analysis.

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