UltraTech Cement has acquired a 23% stake in India Cements for around Rs 1,900 crore, preventing potential future bids for the leading peninsular manufacturer, as the race intensifies to control capacities in a highly regionalised and freight-intensive cement business that’s the world’s second biggest after China.
UltraTech, the Aditya Birla Group cement maker and the country’s largest, bought 70.6 million shares of India Cements as a “non-controlling financial investment” at up to Rs 267 a share, the acquirer said in customary filings Thursday morning.
UltraTech bought the shares from billionaire investor Radhakishan Damani, his family members and his investment firms Derive Investments and Derive Trading and Resorts.
“By investing Rs 1,900 crore, UltraTech has blocked the capacity of almost 15 million tonnes,” said Manish Valecha, research analyst at Anand Rathi Institutional Equities. “So, now it is ahead in the race in terms of additions.”
“Whether it does the open offer now or later, the 15 million tonnes are certainly not going to anyone else,” said Valecha.
This move by the Aditya Birla Group company comes after its closest competitor – Adani Cement – announced the buyout of south-based Penna Industries early this month, with a 14-million-tonne capacity. Adani Cement and JSW Cement were also believed to be in the race for Damani’s stake in India Cements.
UltraTech already has a capacity of more than 150 million tonnes in the world’s second-biggest cement-manufacturing and consuming nation. It has targeted a production capacity of 200 million tonnes by March 2027.
It currently has a 23-24% market share in India, having added more than 50 million tonnes of capacity in five years, of which 19 million tonnes was in a year alone.
While the southern markets of India account for a third of the country’s total production of cement, UltraTech’s presence in the region was significantly lower than its presence elsewhere in the country. The firm had announced the acquisition of the cement division of Kesoram Industries last year, which has a capacity of 10.75 million tonnes, and two integrated manufacturing units in Telangana and Karnataka.
With an investment in the seven-decade old India Cements, among the largest players in south India with a capacity of around 13 million tonnes and a presence across Tamil Nadu, Andhra Pradesh and Telangana, UltraTech is looking to fortify its foothold in the south.
Promoter N Srinivasan and his family own a 28.42% stake in India Cements, although a portion of those shares are pledged.
Damani first bought a 1.35% stake in India Cements during the September 2019 quarter and increased it to 19.89% by the end of March 2020. He marginally increased the stake to 20.4% in July 2020. In January 2021, Damani increased his stake to 21.14%, and by December 2021, he had further increased it to 22.76%.
