Is Ambuja Cement & ACC merger on the cards after Adani’s Holcim deal?


At 10.5 billion dollars, Adani Group’s buy out of Holcim India’s stake in Ambuja Cements and ACC marks India’s most expensive deal in the sector. With this, the Group has also leaped to second position in the cement industry, coming only after Ultratech Cement.

While Holcim owns 63.19% stake in Ambuja Cements and 4.48% in ACC; Ambuja Cement, in turn, owns 50.05% in ACC.

The Adani family plans to make an open buy offer to buy 26% stake in these two companies from non-promoter shareholders, subject to regulatory approvals. Once approved, will enjoy Ambuja and ACC’s combined capacity strength of 67.5 metric tone.

Going forward, analysts believe that may consider the merger of and ACC in the medium term as it will help them rationalize fixed cost quotients at both these entities.


Market analyst G Chokkalingam, for instance, believes that the acquisition would trigger re-rating of ACC and Ambuja Cements as businesses may merge under one entity.

Those at Kotak Institutional Equities, too, believe that the Ebitda per tonne for Ambuja and ACC is lower than Ultratech Cement. And this gap can be covered by Adani through synergy benefit from eventual merger of the two companies.

The benefits, it says, may include saving from existing royalty payment to Holcim, investments in cost-saving projects, and margin expansion opportunity through brownfield capacity expansion.


That said, some analysts believe Adani may go for brand consolidation, rather than outright merger.

Speaking to Business Standard, Uttam K Srimal, Senior Research Analyst, Axis Securities says, ACC, Ambuja lost market share over the last few years, but Adani’s acquisition will bring aggression in expansion. While there may be more consolidation in the sector going ahead, there may also be brand consolidation as Ambuja and ACC hold strong brand presence across India.

That said, analysts see limited near-term synergies from the deal.

According to Gaurav Dua, Head – Capital Market Strategy, Sharekhan by BNP Paribas, Ambuja and ACC are already operating at high utilization levels. The takeover is unlikely to provide immediate output boost, he says adding that medium-term may see backward integration benefits and aggressive expansion will be eyed.

Overall, from an investment view point, analysts expect ACC to see higher re-rating as the stock has, traditionally, been an affordable bet.


At the bourses, ACC closed nearly 4% higher at Rs 2,195 per share, while Ambuja Cements rose 2.6% to 368 rupees per share on the BSE in Monday. In comparison, the benchmark indices closed 0.3% up.

As regards Tuesday, will track the listing of insurance behemoth Life Insurance Corporation of India.

Shares of LIC were trading at a discount of Rs 15-20 a piece over its issue price of Rs 949 in the gray market on Monday, suggesting a weak listing today.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard,

Digital Editor

Source link

Leave a Comment

Your email address will not be published. Required fields are marked *