Ambuja Cement to Acquire Orient Cement: A Strategic Move for Growth

Ambuja Cement Acquires 45.7% of Orient Cement

In a significant development for the cement industry, Ambuja Cement, part of the Adani Group, is set to acquire 45.7% of Orient Cement at Rs 395.4 per share. This price represents a 12% premium over Orient Cement’s closing price on Monday, positioning Ambuja Cement for expansion in key markets.

Open Offer for Public Shareholders

This acquisition has triggered an open offer for an additional 26% stake from public shareholders, making it one of the most significant deals in recent times. Ambuja Cement will fully fund the acquisition through internal accruals, strengthening its balance sheet.

Capacity Expansion and Market Reach

The acquisition will add 8.5 MTPA to Ambuja Cement’s existing operational capacity. Orient Cement’s highly efficient operations, along with its strategically located plants in South and West India, provide a logistical advantage that will help optimize costs. Additionally, Orient Cement holds high-quality limestone mines, further boosting production potential.

Share Price Rally

Orient Cement has seen a remarkable 24% rally in its share price over the last six trading sessions, driven by the acquisition news. This surge includes Tuesday’s significant stock performance, reflecting positive market sentiment toward the acquisition.

Strategic Benefits for Ambuja Cement

The acquisition will significantly increase Ambuja Cement’s market presence in India, improving its pan-India market share by 2%. With plans to expand its capacity to over 100 MTPA by 2025, Ambuja is well-positioned to benefit from the increased demand for cement in the infrastructure and construction sectors.

Financial and Operational Impact

Orient Cement, being almost debt-free, will enhance Ambuja’s financial strength. The acquisition will also improve Ambuja’s ROCE and is expected to achieve a sustainable EBITDA of more than Rs 1,500 per tonne by FY28. The long-term goal is to achieve a ROCE of over 15%.

Conclusion: A Win-Win Deal

This acquisition marks a major milestone for Ambuja Cement, accelerating its growth journey and enhancing its market position. For Orient Cement, this transition opens new opportunities under the leadership of the Adani Group, ensuring continued growth and sustainability.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.