Ultratech, Ambuja Cements eye more cement sector assets for expansion

Ultratech found Orient Cement deal as expensive

The Aditya Birla group’s Ultratech and billionaire Gautam Adani-owned Ambuja Cements are scouting for more cement sector assets after a string of acquisitions by both cash-rich companies, bankers said. Ultratech, owned by billionaire Kumar Mangalam Birla, bowed out of the race for Orient Cement, a CK Birla-owned company, as it found the asking price too expensive after due diligence, they said.

Also after the acquisition of Kesoram and India Cements, Ultratech was more keen to digest both acquisitions and avoid overlap by acquiring any new asset.

“Both companies are quite aggressive in expanding capacity via mergers and acquisitions (M&As) and are making good offers to other companies, especially owned by private equities. In the case of Orient, Ambuja offered a better deal than other bidders,” said a banker close to the transaction. Orient Cement share price went up by 70 per cent in the last one year to Rs 343 as on Tuesday.

Ambuja Cement aims to increase its production capacity from 100 million tonnes per annum (mtpa) to 140 mtpa by FY28. In contrast, its main competitor Ultratech plans to expand its capacity from 150 mtpa to 200 mtpa by FY27. The race between both billionaires to the top has led to cement assets getting far better valuations, bankers said.

For Orient Cement, there were several rounds of negotiations between the two companies. “But Orient Cement’s ask price was very high even for Ultratech, which is known to be quite aggressive,” said a source.

Ultratech is already awaiting the court’s approval for the acquisition of Kesoram Cements assets and its acquisition of India Cements in July this year is awaiting Competition Commission of India nod.

Bankers said several private equities have acquired stakes in Indian cement companies, including True North, buying majority stake in Shree Digvijay Cement Co in the last few years. They may exit if they get a good offer.

As of March this year, Ultratech's net debt was Rs 3,942 crore while Ambuja's cash and cash equivalent far exceeded its debt of Rs 699 crore. Ultratech's total market valuation was Rs 3.12 trillion while that of Ambuja was Rs 1.37 trillion. Ambuja Cement also owns 56.7 per cent stake in ACC, which has a market value of Rs 42,183 crore as of Monday.