Ambuja Cements’ shares opened in green at Rs 360.80 apiece on BSE
UltraTech Cement of the Aditya Birla group has formally joined the race to acquire Swiss cement giant Holcim’s stake in Ambuja Cement and ACC Limited.Gautam Adani-owned Adani Group, and Sajjan Jindal’s JSW group jumped into the race to acquire control that would instantly boost their position in the cement market.On Wednesday, Ambuja Cements’ shares opened in the green at Rs 360.80 apiece on the Bombay Stock Exchange (BSE), while the ACC scrip rose to Rs 2,207 apiece. The Aditya Birla Group is ready to divest voluntary assets of approximately 15 million tonnes per annum (mtpa), as a solution to comply with market share norms.India’s antitrust body, the Competition Commission of India (CCI), has provided long-form merger notifications in eight out of 16 cement agreements since 2011. Of these eight, UltraTech independently had filed for five since 2013 with the CCI.UltraTech was optimistic about getting the antitrust regulator’s green signal.CCI lawyers are of the view that if firms can come up with possible solutions, approvals can come in as early as 30 working days. All five Aditya Birla Group cement agreements have been approved within the 30-working day period – also known as phase I approvals.However, in phase II approvals, the regulator can take up to 210 calendar days from the time of obtaining the application to clear a proposal, if no corrective measures are provided.Birla will volunteer a remedial plan involving divesting assets for a fast phase I approval.Given the strong market presence of both players coupled with the oligopolistic nature of the industry, the CCI will generally concentrate on the combined market shares of parties, the extent of barriers to access in the market, and the position of their competitors in the market.
Kesoram to boost cement capacity to 15 MT in next 3-4 years
The firm’s overall outlay would be between Rs 350 and Rs 500 crore
Kesoram Industries Ltd, a B K Birla Group subsidiary, announced that it plans to increase its cement production capacity to 15 million tonnes (MT) from 11 MT.
Kesoram, which has demerged its tyres and rayon businesses, is on course to make a profit in the current fiscal year (FY).P Radhakrishnan, whole-time director & CEO, told the media that they have chosen to increase cement capacity to 15 MT in phases over the next 3-4 years, up from 10-11 MT.
The overall outlay would be between Rs 350 and Rs 500 crore.He said that the company’s financials would improve in the next quarters as debt reduce and low-cost funds refinance. He added that in 2022, they will turn profitable on a net basis.
Radhakrishnan said they are always attempting to reduce their interest cost to enhance the financial situation. This year, they want to discharge the debt of Rs 500-600 crore and refinance a portion of the total existing debt (Rs 300-400 crore) with low-cost funds to reduce interest costs.With high-cost Optionally Convertible Debentures (OCDs) and Non-Convertible Debentures (NCDs), the business has an outstanding debt of Rs 1650 crore, down from over Rs 2000 crore a year earlier.
The B K Birla group firm also stated that it is shifting its product mix to include more value-added cement, which would increase its EBITA by another Rs 150 crore in the next two years, bringing it to over Rs 950 crore yearly.
An offcial stated that they’re always adding mixed cement to their inventory and plan to increase this to 80% in two years from currently 50%.Kesoram planned to increase capacity by one million tonnes by de-bottlenecking and then add a kiln to the existing facility to decrease capital expenditures.
After weighing all possibilities, the firm will shortly begin accepting fixed deposits, which would help the company get closer to its target of Rs 200 crore.
Cement demand to rise mid-to-high single digits in medium-term
Capacity utilisation to fall to 65% in cement industry: Fitch Ratings
Fitch Ratings told the media that it believes a sustained gross domestic product (GDP) growth, the government’s thrust on infrastructure and affordable housing, and revival of corporate capex will underpin the growth in the cement industry.
It expects India’s cement demand to increase by mid-to-high single digits over the medium term after an estimated mid-teen rebound in FY22.The cement industry’s utilisation will drop to 65% from 70%, estimated in FY22, as faster new capacity additions will outpace demand growth.
It will temper cement producers’ pricing power, and the industry will consolidate further.
Fitch Ratings said Adani Group’s aggressive approach to cement capacity expansion after it acquired Holcim Indian business. It will result in increasing the competition in the industry.
The increased prices by cement producers will not fully counter the energy prices due to the Russia-Ukraine war.
It said that the cement producers’ per tonne margin in FY23 will stay much below the pandemic level in FY21 when low energy prices increased profit despite having low demand.
Major cement industries reduced financial leverage since FY20 to support financial flexibility despite lower profitability and plans for higher capital expenditure (capex) expansion.
Fitch Ratings added that the impact of inflationary pressure on cement demand from the Russia-Ukraine war had been limited, but downside risks might increase if macroeconomic conditions deteriorate significantly.
Adani Group’s Holcim acquisition doubles India Inc’s deal to $19.1 billion
The sale was worth roughly $7.965 billion a year earlier in May 2021
The $10.5 billion acquisition of cement major Holcim by Adani Group has more than doubled India Inc’s deal value to $19.1 billion in May 2022, with 190 deals. The sale was worth roughly $7.965 billion a year earlier in May.
Mergers and acquisitions, a private equity landscape, and public market activity such as IPOs are all part of the deal.
According to the Grant Thornton Bharat report, the overall transaction value decreased by 59% in May compared to April due to the $40 billion merger agreement between HDFC Bank and HDFC that was struck in April.
Adani Group and Holcim signed a formal deal last month to buy a 63.11% share in Ambuja Cement, which has a 50.05% holding in ACC, as well as a 4.48% direct investment in the company. The deal should be completed in the second half of 2022.
Apart from the Adani-Holcim agreement, the Grant Thornton study included Reliance and Bodhi Tree’s $2 billion investment in Viacom18 in May. In addition, 13 more high-value purchases worth more than $100 million totalled $5.1 billion in the month under review.
In terms of volume, there were 190 deal transactions in May, up from 120 in the same month the previous year. In addition, volume climbed by 3% over the prior month.
Shanthi Vijetha told the media that start-up, e-commerce, and IT dominated the transaction volumes for the month, while manufacturing, media and entertainment, and energy topped the overall value.
In May 2022, there were roughly 40 merger and acquisition transactions worth $11.9 billion, with more than a fourth of them coming from the startup sector, which saw 11 agreements for $70 million.
Furthermore, the research stated that in May, private equity investments reached new highs in terms of value and number, totalling $7.2 billion across 150 agreements, representing a 169% increase in value and an 81% increase in deal volume.