UltraTech to Acquire 32.72% Stake in India Cements, Expanding Presence in Southern Market

On July 28, 2024, The Board of Directors of UltraTech approved the purchase of a 32.72% equity stake in India Cements Limited from its promoters and their associates. In June 2024, UltraTech made a financial investment to acquire a 22.77% equity stake in India Cements at ₹268 per share. Following this investment, the promoter group approached UltraTech to sell their holding.

India Cements has a total grey cement capacity of 14.45 million tonnes per annum (mtpa), with 12.95 mtpa in the South (mainly Tamil Nadu) and 1.5 mtpa in Rajasthan. The acquisition is subject to regulatory approvals.

Upon signing the Share Purchase Agreement (SPA) and receiving the necessary approvals, UltraTech will pay ₹3,954 crore at ₹390 per share for the 32.72% stake. This acquisition will trigger a mandatory open offer at ₹390 per share, which will proceed after all regulatory approvals are obtained.

The acquisition requires approval from the Competition Commission of India.Pending regulatory approvals, the acquisition and the Open Offer are expected to be completed within 6 months.

UltraTech Acquisition Details

Related Party Transaction
The proposed acquisition is not a related-party transaction. UltraTech’s promoter/promoter group/group companies have no interest in India Cements. UltraTech currently holds 7,05,64,656 equity shares of India Cements, representing 22.77% of its equity share capital, as a non-controlling financial investment.

Cost of Acquisition
The shares will be acquired at ₹390 per equity share. In accordance with SAST Regulations, the open offer for the equity shares of India Cements is also priced at ₹390 per share. The transaction will be settled in cash.

Objectives of the Acquisition

This acquisition aims to expand UltraTech’s presence in the highly fragmented, competitive, and fast-growing Southern market, especially in Tamil Nadu, where UltraTech has a limited footprint. Acquiring ready-to-use assets will enhance operational efficiencies by reducing the time to market compared to greenfield projects.

It will also allow UltraTech to optimise or defer its existing capacity expansion plans in the Southern market, leveraging India Cements’ ready-to-use assets. The acquisition will enhance shareholder value and create direct and indirect employment opportunities.

On July 29, 2024, UltraTech Cement Ltd’s share price opened at ₹11,680.00, touching the high of ₹11,832.00 as of 12:22 AM on the NSE.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.