The price paid by Ultratech for India Cements stake is very attractive for N Srinivasan, industry veteran and Shree Digvijay Cement's executive chairman Anil Singhvi said, adding that Birla's move to acquire the grinding unit some months ago was a step in the right direction.
In conversation with CNBC-TV18, Anil Singhvi said, "This is a huge advantage for Mr Srinivasan". Adding, "I would trace back to when UltraTech acquired their grinding unit in Nashik about 6-12 months ago. I think there were indications of moving in the right direction. Of course, Mr RK Damani's holding was a clear path that they would not stop at 23 percent, that it was not an investment on the balance sheet but they would acquire the complete asset as well."
The shares of India Cement are higher by over 42% since UltraTech picked up stake in the company for the first time last month.
Had RK Damani not entered India Cements, Mr Srinivasan would not have even dreamt of managing a price of Rs 390 per share of his stake in India Cement, Singhvi added. "This is a very, very high price for the share of India Cements, no doubts about it."
Anil Singhvi also said that the smaller South-based, standalone cement companies may see rising interest from potential buyers, and over the next 2-3 years we can expect greater consolidation. Both Kesoram and India Cements were among the weaker hands in the Southern cement market, Singhvi said, adding that both have now been acquired by KM Birla-led UltraTech Cement.
"From 2006-2022, not many deals of this nature happened in the cement space. I think this whole process will get accelerated because the industry is still very fragmented." Singhvi added.
UltraTech Cement on July 28 approved the purchase of a 32.72 percent stake in India Cements from its promoters and associates, adding to its initial acquisition of a 22.77 percent stake in June. After latest transaction, totalling Rs 3,954 crore at Rs 390 per share, UltraTech's ownership in India Cements reaches 55.49 percent, necessitating an open offer which UltraTech announced at a price 4% higher than the closing price on Friday.
India Cements installed capacity is at 14.5 MTPA, while that of UltraTech was 141 MTPA before the deal on Sunday. The Kesoram and India Cement deals enhance UltraTech's competitive edge over peers as its Southern capacity will more than double to over 20 percent.
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