Sanghi Ind freezes at 5% upper circuit as Ambuja eyes buying majority stake

Shares of Sanghi Industries were locked in the 5 per cent upper circuit at Rs 100.73 on the BSE on Wednesday after a Reuters report said that Ambuja Cements has reached a deal to acquire a majority stake in the company. The deal valuation is expected to be pegged at Rs 6,000 crore.

A combined 1.2 million shares had changed hands and there were pending buy orders for 2.3 million shares on the NSE and BSE. In comparison, the S&P BSE Sensex was down 1 per cent or 680 points at 65,779.

According to the Reuters report, the deal by Ambuja is likely to be announced as soon as Wednesday. Though, the share of the stake to be acquired is not known. 

Shares of Sanghi Industries were trading at a 52-week high level. The stock surpassed its previous high of Rs 97.74 touched July 25, 2023. In the past one month, it has soared 41 per cent as compared to a less than 1 per cent rise in the benchmark Sensex.

Sanghi Cement has a total capacity o f 6.1 MT, which represents around 7 per cent market share (in terms of capacity) in the Western markets of India. The acquisition would further strengthen the presence of Ambuja-ACC in the western market (whose current share is 20 per cent), according to ICICI Securities.

At an enterprise valuation (EV) of Rs 6,000 crore (which includes debt of Rs 1,800 crore), EV/t stands at $120/t, which is roughly 20 per cent higher than replacement cost. At the current market cap, Sanghi is trading at EV/T of $86/t.  Ambuja- ACC combined have a robust balance sheet (with cash & investment of Rs 11,000 plus crore) to fund entire acquisition through internal accruals, the brokerage said in a note.

Meanwhile, on July 5, 2023, India Ratings and Research (Ind-Ra) downgraded Sanghi Industries’ Long-Term Issuer Rating to ‘IND D’ from ‘IND BB’ with a negative outlook.

The downgrade reflects Sanghi Industries’ rescheduling of its interest obligations on the rated NCDs due to liquidity issues. The agency believes that the rescheduling has been due to liquidity challenges as the company did not have any material cash balance on June 30, 2023 and its available liquidity buffer in the form of unused fund-based limits (after considering devolved letters of credit) was only around Rs 2 crore, lower than the interest obligations towards the NCDs. CLICK HERE FOR FULL DETAILS