Analysts expect modest impact on stock following UltraTech-India Cement deal

UltraTech Cement is set to acquire a 32.72% stake in India Cements for Rs 3,954 crore at Rs 390 per share.

Market experts expect a modest impact on the stock prices of UltraTech Cement and India Cements following the former's acquisition of a 32.72 percent stake in the southern cement major even though they believe the deal is an important one within the cement space.

“The Rs 390 offer price is a modest 4 percent premium over the current market price, so, any significant movement in India Cements' stock on Monday is unlikely, given its recent gains. For UltraTech Cement, the industry's consolidation will likely result in a positive trading outcome on Monday, affirming its market leader status post-acquisition,” said Axis Securities' Uttam Kumar Srimal

Independent analyst Ambreesh Baliga said that investing in UltraTech is advisable for long-term gains rather than short-term trading while highlighting the fact that developments like UltraTech Cement acquiring India Cements and Adani’s acquisition of Ambuja Cements and ACC clearly show that industry consolidation is underway.

“This trend suggests that the cement industry will soon be dominated by two to three large players, making it difficult for smaller players to compete and likely leading to their acquisition. With ongoing infrastructure and real estate development, cement demand will continue to rise. Since greenfield projects take over 30 months to complete, acquiring smaller players is a strategic move for quick raw material access,” said Baliga

The latest acquisition will increase UltraTech Cement’s ownership in India Cements to 55.49 percent, pending regulatory approvals. It will trigger an open offer by UltraTech Cement to buy up to 8.05 crore shares, or 26 percent of the equity, from public shareholders at Rs 390 per share, totalling approximately Rs 3,142.39 crore.

While the initial acquisition of a 22.77 percent stake was completed in June, the latest purchase marks the complete stake sale and exit of promoter N Srinivasan from India Cements.

"Now, UltraTech Cement has acquired a controlling stake in India Cements, valuing the deal at $123 per tonne for 14 million tonnes of assets, which is reasonable. UltraTech can optimise these assets with modifications and improvements, facilitating expansion in the same region. This will boost UltraTech's market share in the competitive southern market and contribute to industry consolidation, benefiting companies like UltraTech, Ambuja, ACC, and Dalmia Bharat,” said Kumar of Axis Securities.

Interestingly, analysts also believe that while the cement sector is consolidating, Adani's acquisition of ACC and Ambuja has disrupted the market, eroding volumes and blurring regional differences in pricing and positioning. Earlier, the north, south, east, and west had distinct market dynamics, but this has changed post-Adani's acquisition.

Shyam Sekhar, portfolio manager and investor, wrote on X, “The South Indian cement industry will never be the same again. Expect the industry to quickly slip into turmoil. The man who held the industry together officially quits the scene. After this, the ensuing free-for-all will see politics, market pressures, ego battles, and greed exert pressures not seen in the industry for the past two decades. Very bad days ahead for Southern cement companies. Their golden era is as good as over. I am calling it today.”

Read more: UltraTech Cement board approves acquisition of India Cements

The latest acquisition, valued at Rs 3,954 crore for 32.72 percent equity at Rs 390 per share, is contingent on regulatory approvals and will trigger a mandatory open offer at the same price. The earlier acquisition in June was made at Rs 268 per share.

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