Adani Cement announces acquisition of CK Birla Group’s Orient Cement at an equity value of ₹8,100 crore

Cement Adani The CK Birla Group’s Orient Cement was bought out on Tuesday for an equity value of ₹8,100 crore, escalating the competition for market share in the world’s second-largest building materials business by installed capacity and consumption.

With around 34 million tonnes of capacity shifting in favor of the two market giants, UltraTech Cement and Adani Cement, this is the third agreement in the Indian cement business this fiscal year.

At ₹395.40 per share, Ambuja Cements would purchase the promoter’s 37.90% ownership in Orient Cement together with an additional 8.90% from the company’s public shareholders.

After then, the business will make an open offer to buy an additional 26% of the business for the same sum. Internal accruals will provide all of the funding for the transaction.

“The deal is working out to a value of around $114 per tonne,” Elara Securities analyst Ravi Sodah said. “The price is higher than that paid for Sanghi and Penna, but in line with the India Cement deal,” he said.

Several Suitors

CEO Ajay Kapur said in July that the sector is not experiencing a “frenzy” and that growth is occurring in a planned way. According to him, Penna Cement and Sanghi Industries both paid less than $90 per tonne for the transaction.

“We have set a new growth goal of less than $80/tonne internally. He had said at the time that the operational team’s goal was to further reduce it by an additional $5 to $10.

In addition to Adani, Sajjan Jindal’s JSW Cement and Kumar Mangalam Birla’s UltraTech Cement were vying for the acquisition of Orient Cement. According to an ET story from October 2023, chairman CK Birla had contacted Gautam Adani, the chairman of the Adani Group, about selling his share in the company.

According to Karan Adani, director of Ambuja Cements, “this well-timed acquisition represents another important step forward in Ambuja Cements’ accelerated growth journey, increasing cement capacity by ~30 MTPA within two years of acquisition.”

Although many parties have long shown interest in Orient Cement’s assets, the buyer was eventually chosen based on the assets’ worth and what would best serve our stakeholders, Madhavan H, the chief financial officer of CK Birla Group, said ET.

Three functional components

With a combined production capacity of 8.5 million tons (mt) across three operating facilities in Maharashtra, Telangana, and Karnataka, Orient Cement now has the statutory authorization to expand its production capacity by an additional 8.1 mt. Additionally, it has excellent limestone sources in Chittorgarh, Rajasthan, where an extra 6 mt of capacity might be installed.

Shri Jagannath Educational Institute, Rukmani Birla Educational Society, and a few other trusts are among the public shareholders whose shares Ambuja Cements would be purchasing. Madhavan of the CK Birla Group said that they are not a member of the promoter group. Adani Cement anticipates completing the transaction in three to four months, pending permission from the Competition Commission of India.

Identifying growth synergy

“OCL has the potential to boost cement capacity to 16.6 MTPA in the near future due to its strategic locations, high-quality limestone reserves, and necessary statutory approvals,” said Karan Adani.

In its investor presentation, Adani Cement said that the acquisition of Orient Cement will assist lower its freight costs in addition to increasing its market share by an additional 200 basis points.