“Holcim has been less aggressive in capacity addition, and with the change in the promoter, this could change the outlook for
and Ambuja in the mid-long term, and investors can get one better cement stock to invest in other than ,” said Vishal Periwal, analyst, Capital. “However, both ACC and Ambuja are unlikely to be re-rated in the short-term.”
On Sunday, the Adani Group entered into definitive agreements to acquire Swiss cement major Holcim’s stake in
and ACC. According to a stock exchange filing, the group also announced open offers to buy up to a 26% stake at ₹385 for Ambuja Cements and ₹2,300 for ACC.
Shares of Ambuja Cement ended at ₹368, up 2.6% on Monday, while ACC shares closed at ₹2,192, 3.7% higher than their previous closing. In the past 10 years, both ACC and Ambuja have underperformed sector leader Aditya Birla Group’s UltraTech and the benchmark Nifty. ACC and Ambuja shares have gained 88% and 156% in 10 years compared to a 339% rise in UltraTech share price or 221% gain in the Nifty index. ACC is traded at 24 times its one-year forward price to earnings (PE) ratio, a discount to UltraTech’s 28 times.
“In the short-term, cement companies will face margin pressure over the steep rise in input costs, but the long-term outlook for both ACC and Ambuja Cement has improved with the change in management,” said Gaurav Dua, head – of capital market strategy, Sharekhan. “Adani group, which is known for aggressive expansions, can change the dynamics for these two companies by deriving benefits from its logistics and energy generation businesses.
The acquisition would make Adani Group the second-largest cement player in the country with a total capacity of 70 million tonnes per annum. According to analysts, the combined capacity of ACC and Ambuja is valued at $159 per tonne, which is higher than the replacement cost.
“The acquirer will not chase growth capex immediately if it is a leveraged buy-out,” said Gautam Duggad, head of research, . “In the long run, however, sector dynamics would depend on the growth plans and aggressiveness of the acquirer.”
Many analysts said Adani Group should focus on further cost optimisation as there is little scope to gain market share through volume push.
Capacity utilisation for ACC-Ambuja is already high at 80%, leaving little room for aggressive volume push, and general cost pressures and likely acquisition debt could warrant a better financial discipline by the buyer,” said Devesh Agarwal, analyst,
. “But any concerns about the likely aggressive capacity-addition plans could weigh on sector valuations.”
