Ambuja, Orient, ACC shares soar on merger; analysts see synergies boost

Post-merger, analysts reckon Ambuja Cements will emerge as one of the largest cement companies in India by capacity

Investors have put money into Ambuja Cements shares as the cement major moved to consolidate its cement operations.

 

The Adani Group company has proposed to merge its subsidiaries ACC and Orient Cement into the parent entity.

 

This is a step that analysts believe will simplify group structure, unlock synergies, and strengthen its competitive positioning.

 

Ambuja Cements shares gained 4.3 per cent intraday, while those of Orient Cement and ACC soared 9.8 per cent and 1.4 per cent, respectively.

 

The shares, however, pared gains to close in the range of -1.37 per cent to 4.18 per cent. By comparison, the BSE Sensex settled 0.05 per cent lower. 

Post-merger, analysts reckon that Ambuja Cements will emerge as one of the largest cement companies in India by capacity.

 

This is in line with the company's strategic plan to increase cement production capacity from 107 million tonnes per annum (MTPA) to 155 MTPA by FY28. They highlight operational efficiencies, cost optimisation, and balance-sheet strengthening as key benefits of the move. 

Motilal Oswal Financial Services (MOFSL), for instance, said the proposed amalgamation would streamline Ambuja Cements' corporate structure and improve capital allocation.

 

According to the brokerage, the merger will reduce complexity, eliminate cross-holdings, and enhance transparency for investors. 

“The merger will enable more efficient allocation of capital and management, unlock scale benefits, and enhance long-term shareholder value. The merger will simplify and rationalise the network, branding, and sales promotion-related spending, helping optimise costs and improve margin by ₹100 per tonne. Besides, the merger will facilitate achieving targeted cost, margin expansion, and growth metrics over the medium-to-long term,” it said in a report.

 

Deal contours

 

According to the scheme of arrangement, Ambuja Cements will issue 328 equity shares (face value: ₹2 per share) for every 100 equity shares (face value: ₹10/shares) of ACC, and 33 equity shares (face value: ₹2/share) for every 100 equity shares (face value: ₹10/share) of Orient Cement. 

While the deal values ACC at par with the current market price, it valued Orient Cement around 9 per cent premium to Monday's closing price. 

Besides, given the ongoing merger of Sanghi Industries and Penna Cement with Ambuja, 12 equity shares of Ambuja will be issued for every 100 equity shares of Sanghi Industries.

 

Ambuja will also pay ₹321.5/share to the eligible shareholders of Penna Cement. 

The deal will lead to an equity dilution of around 12 per cent for Ambuja Cements, reducing the promoter group to 60.94 per cent from 67.65 per cent.

 

Analysts bullish on Ambuja Cement

 

As the deal could help create a “pan-Indian cement power house,” analysts believe the merger could strengthen Ambuja Cements' pricing power and bargaining position with suppliers and logistics partners, given the expanded scale of operations.

 

The combined entity will have a wider geographic footprint, particularly strengthening its presence in central and southern India, where Orient Cement has meaningful exposure.

 

It will also help in achieving the management's target of increasing clinker capacity from 73 million tonnes (MT) to 81 MT by FY27 and 96 MT by FY28. It would reduce total cost per tonne to ₹4,000 by FY26, ₹3,800/tonne by FY27 and ₹3,600-3,650/tonne by FY28, the report said. 

“At the current market price, we see the transaction as neutral (with a slight negative bias) for ACC investors, while mildly positive for Orient shareholders. Further, commercial operations were already running as a consolidated unit (ACC + Ambuja + Orient + Penna + Sanghi). Hence, we see this amalgamation having a neutral (with a positive bias) effect on our earnings estimates,” said analysts at Emkay Global Financial Services. 

They retain a target price of ₹650 and an ‘add’ rating. It maintained its ‘sell’ rating on ACC stock with a target of ₹1,600.

Motilal Oswal, too, said the deal appears to be neutral for ACC, but positive for Ambuja Cements shareholders. It maintained its ‘buy’ rating on Ambuja with a share price target of ₹750. 

JM Financial, too, maintained ‘buy’ on Ambuja with a target of ₹700 as it expects the company's consolidated blended earnings before interest, taxes, depreciation and amortisation (Ebitda)/tonne to increase from ₹795 in FY25 to ₹1,250 by FY28, amid higher volumes and improved profitability.  

 

 

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