Ambuja Cements gains 3% on acquisition of Sanghi Industries for Rs 5,000 cr

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Shares of Ambuja Cements (ACL) were firm in Thursday's intra-day trade, gaining 3.5 per cent at the day's high of Rs 477 on the BSE after the company announced acquisition of Sanghi Industries (SIL) at an enterprise value of Rs 5,000 crore.

ACL will acquire 56.74 per cent shares of SIL from its existing promoter group, Ravi Sanghi & family. The acquisition will be fully funded through internal accruals.

Meanwhile, shares of SIL were locked at the 5 per cent upper limit at Rs 105.76, on volume of around 19 lakh shares on the BSE as against the two-week average volume of around 5.67 lakh shares. In the past one month, the market price of SIL has zoomed 45 per cent.

ACL is a cement and building material company of Adani Cement and part of the diversified Adani Group.

SIL has clinker capacity of 6.6 MTPA (million tonnes per annum), cement capacity of 6.1 MTPA and limestone reserves of 1 billion tonnes. SIL’s Sanghipuram unit is India’s largest single-location cement and clinker unit by capacity, with a captive jetty and captive power plant. Ambuja will increase cement capacity at Sanghipuram to 15 MTPA in the next two years.

"The acquisition of SIL will help ACL to strengthen its market leadership and increase its cement capacity to 73.6 MTPA from the current 67.5 MTPA. With the ongoing capex of 14 MTPA and commissioning of 5.5 MTPA capacity at Dahej and Ametha by Q2 of FY24, the Adani Group’s capacity will be 101 MTPA by 2025," ACL said.

Analysts at ICICI Securities believe that the acquisition would further strengthen the presence of Ambuja-ACC in the western market (current share ~ 20 per cent).

ACL, further, said that it has signed Share Purchase Agreement (SPA) to acquire up to 146.58 million equity shares constituting 56.74 per cent of voting share capital of SIL, subject to regulatory approvals, for a consideration of up to Rs 114.22 per share.

ACL is making an open offer for up to 67.16 million equity shares, constituting 26 per cent of SIL, at a price of Rs 114.22 per equity share from the public shareholders of SIL.

Technical View

Bias: Positive

Target: Rs 487; Rs 500

Support: Rs 438; Rs 434

Since the last five trading sessions, shares of Ambuja Cements have been holding firmly above the long-term (200-DMA), which stands at Rs 451.90. The bulls are likely to have the upper hand as long as the stock sustains above the 200-DMA.

On the upside, the stock can target Rs 487, shows the weekly chart, above which a sharper rally towards Rs 500-mark seems likely.

On the downside, the stock could seek support around Rs 438 - Rs 434.

(With inputs from Rex Cano)