Share price of UltraTech Cement rose by over one per cent in early trade on Monday after the company announced the acquisition of 32.72% stake in India Cements. Meanwhile, share price of India Cements also rose by about 3% on BSE.
Aditya Birla Group-owned UltraTech Cement said its board of directors has approved the acquisition of 32.72% equity stake of promoters and their associates in India Cements at ₹390 per share for ₹3,954 crore. This price is 4.1% higher than the closing price of India Cements shares of ₹374.60 last Friday.
In June 2024, UltraTech had made a financial investment in South India-based cement maker India Cements to acquire 22.77% equity at a price of ₹268 per share. With the latest announcement, UltraTech Cement will become the majority shareholder in India Cements with a 55.49% stake.
The stake sale will also trigger a mandatory open offer. Both the stake sale and the open offer will be subject to regulatory approvals, UltraTech Cement said in a stock exchange filing. Analysts believe the acquisition will significantly strengthen UltraTech’s position and are expected to more than double the company’s capacity market share in the southern region.
deal valuation Assuming
70% – 75% utilization with EBITDA per tonne of ₹1,000 – ₹1,200 in FY26E and FY27E, the implied valuation is 13.5x/10.5x EV/E, which is 30% higher than what UltraTech is currently trading at. There is a discount of -35%. To Dharmesh Shah, Research Analyst, MK Global Financial Services.
That said, these assets are likely to generate EBITDA of ₹1,000 – ₹1,300 crore in FY26/FY27E, which will be around 5-6% of our current estimate (not currently included in our estimate).
Capacity
India Cements has a total capacity of 14.45 MTPA of gray cement. Of this, 12.95 MTPA is in the South (especially Tamil Nadu) and 1.5 MTPA in Rajasthan.
The acquisition of India Cements will add 9% to UltraTech Cement’s current capacity and increase its capacity share by 2% on an all-India basis. Post the acquisition, UltraTech’s cement capacity will increase from the current 156 MT ex-Kesoram to 214 MT including Kesoram by FY2027.
UltraTech Cement’s capacity share in the south is expected to almost double from the current ~13% to over 25% by FY20 as its capacity there is expected to grow to over 50 MT from the current 25 MT.
UltraTech Cement share price outlook
Emkay Global maintained ‘Buy’ rating on UltraTech Cement shares with a June 2025 target price of ₹12,800 per share.
Antique Stock Broking also maintained ‘buy’ call with unchanged UltraTech Cement share price target at ₹12,400. UltraTech Cement remains the top pick of the brokerage firm.
At 9:25 am, shares of UltraTech Cement were trading 1.21% higher at ₹11,820.65 on the BSE, while shares of India Cement were trading 0.56% higher at ₹376.70.