Adani Group Ambuja to Buy 46.8% Stake in Orient Cement for ₹8,100 Crore: All You Need to Know
Ambuja Cements, part of the Adani Group, has made headlines on October 22, 2024, by announcing its acquisition of a 46.8% stake in Orient Cement Ltd for an impressive ₹8,100 crore. This strategic move is set to significantly enhance Ambuja’s cement production capacity and market presence across India.
Main Points
Details of the Acquisition
The acquisition involves purchasing 37.9% of shares from Orient Cement’s promoters and an additional 8.9% from public shareholders. Following this, Ambuja will trigger an open offer to acquire an extra 26% stake at a price of ₹395.40 per share. This step is in compliance with the Securities and Exchange Board of India (SEBI) regulations concerning substantial acquisitions.
Financial Aspects
The total valuation of Orient Cement’s operational capacity is pegged at approximately $58 per tonne, which is considerably lower than the typical greenfield setup cost ranging from $110 to $120 per tonne. This acquisition is fully funded through internal accruals, allowing Ambuja to maintain its debt-free status.
Expansion Plans
With this acquisition, Ambuja Cements aims to boost its annual production capacity by 16.6 million tonnes, comprising 8.5 million tonnes currently operational and an additional 8.1 million tonnes ready for implementation across states like Telangana, Karnataka, and Maharashtra. Karan Adani, Director of Ambuja Cements, expressed optimism about reaching a target of 100 million tonnes per annum (MTPA) by the end of the fiscal year 2025.
Market Impact
This acquisition is expected to enhance Ambuja’s market share by 2%, solidifying its position in the competitive cement industry. Analysts believe that this consolidation in the sector could lead to improved efficiencies and reduced logistics costs for Ambuja.
Strategic Advantages
Orient Cement boasts significant assets, including a 5.6 MTPA clinker and 8.5 MTPA cement operational capacity, along with renewable energy resources that support its operations. The company also holds a concession to establish a 2 MTPA cement grinding unit at the Satpura thermal power station in Madhya Pradesh.
The acquisition aligns with Ambuja’s broader strategy to expand its footprint in core markets and leverage high-quality limestone reserves located in Chittorgarh, Rajasthan, which presents opportunities for further capacity enhancement.
Industry Context
This move comes as part of a broader trend where major players in the Indian cement industry are consolidating their positions amid increasing competition. Ambuja had previously acquired stakes in other cement companies like Sanghi Cement and Penna Cement earlier this year.
Statements from Leadership
C.K. Birla, Chairman of Orient Cement and the CK Birla Group, noted that the group is focusing on consumer-centric businesses and believes that Adani Group is well-positioned to drive growth at Orient Cement. He emphasized the importance of sustainability initiatives within Orient’s operations.
Amita Birla, Co-Chairman of CK Birla Group, echoed this sentiment by highlighting the strong market presence of Orient Cement and its commitment to sustainability through renewable energy initiatives.
Future Outlook
Analysts predict that this acquisition will not only benefit Ambuja but also enhance shareholder value for Orient Cement investors due to the attractive acquisition price. The deal is expected to close within three to four months after receiving necessary regulatory approvals.
Ambuja Cements’ acquisition of a significant stake in Orient Cement marks a pivotal moment for both companies as they navigate the evolving landscape of India’s cement industry. With ambitious growth targets set for the coming years, this strategic move could redefine market dynamics and bolster their competitive edge.
