Here's what ACC, Ambuja Cements acquisition means for Adani Group, investors
The acquisition of Holcim’s stake by Adani Group in cement majors Ambuja Cements and ACC may add a whopping Rs 1.10 lakh crore to the group market capitalisation, according to market watchers.
- May 16, 2022,
- Updated May 16, 2022 5:45 PM IST
The acquisition of Holcim’s stake by Adani Group in cement majors Ambuja Cements and ACC may add a whopping Rs 1.10 lakh crore to the group market capitalisation, according to market watchers. At present, the group market value, which includes Adani Enterprises, Adani Ports, Adani Green Energy, Adani Wilmar, Adani Total Gas, Adani Transmission and Adani Power, stands at Rs 14.31 lakh crore. On the other hand, Mukesh Ambani-led Reliance Industries m-cap is hovering around Rs 16.42 lakh crore on May 16.
Holcim, through its subsidiaries, holds 63.19 per cent in Ambuja Cements and 54.53 per cent in ACC (of which 50.05 per cent is held through Ambuja Cements). The value for the Holcim stake and open offer consideration for Ambuja Cements and ACC is $10.5 billion, which makes this the largest acquisition by Adani, and India’s largest-ever merger and acquisition transaction in the infrastructure and materials space.
This acquisition marks the group's foray into the cement sector which is currently having tailwinds due to the government’s focus on infrastructure and revival of housing demand.
Ronald Siyoni, AVP-research, Sharekhan by BNP Paribas said, “Holcim’s combined Indian capacity at around 70MTPA is valued at $159 per tonne which we believe is higher than the replacement cost. The premium of 7 per cent and 9 per cent assigned to Ambuja Cements and ACC stock prices is positive for both the stocks.” Shares of ACC settled 3.94 per cent up at Rs 2197.05 on May 16, while the benchmark BSE Sensex closed 0.44 per cent higher at 53,023.57. Shares of Ambuja Cements closed at Rs 367, up 2.29 per cent against the previous close.
Market analysts added that the acquisition would place Adani group at the number two position in India’s cement sector. “Over the longer term, we expect it to positively impact the cement sector with expectations of industry consolidation along with better pricing discipline,” Siyoni added.
Yogesh Mehta, founder, Yield Maximisers added that it is just an opportunity and entry into the cement sector via Brownfield's acquisition of Holcim. ACC and Ambuja Cement have a total combined capacity of 66 mt. The acquisition may add Rs 1.1 lakh crore in the group’s market capitalisation,” Mehta added.
In terms of financials, Adani Group of companies posted a gross sales and net profit of over Rs 1,82,000 crore and Rs 12,000 crore, respectively, for the year ended March 31, 2022. On the other hand, ACC and Ambuja Cements posted gross sales of Rs 15,814.40 crore and Rs 28,965.46 crore, respectively, in FY21. The net profit of ACC and Amabuja Cements stood at Rs 1851.45 crore and Rs 3690.81 crore, respectively. They are yet to announce their financial results for FY22.
Santosh Meena, head of research, Swastika Investmart said, “The acquisition aligns with group’s focus on infrastructure and synergistic to its other businesses like power, coal and energy, ports and logistics. The cement sector will see additional consolidation and increased competition as a result of this acquisition.”
Commenting on the prospects of ACC and Ambuja Cements, Ravi Singh, vice president and head of research, Share India said, “The transaction would help the companies slash costs, trim debt and better cope with the soaring energy prices and weaker demand that have hurt the sector so far. Also, post the potential merger, there could be a consideration for brand consolidation leading to better margins and higher return on capital employed for the two companies. ACC and Ambuja both stocks are good for long term investment with a target of Rs 2,450 and Rs 420 respectively.”
The acquisition of Holcim’s stake by Adani Group in cement majors Ambuja Cements and ACC may add a whopping Rs 1.10 lakh crore to the group market capitalisation, according to market watchers. At present, the group market value, which includes Adani Enterprises, Adani Ports, Adani Green Energy, Adani Wilmar, Adani Total Gas, Adani Transmission and Adani Power, stands at Rs 14.31 lakh crore. On the other hand, Mukesh Ambani-led Reliance Industries m-cap is hovering around Rs 16.42 lakh crore on May 16.
Holcim, through its subsidiaries, holds 63.19 per cent in Ambuja Cements and 54.53 per cent in ACC (of which 50.05 per cent is held through Ambuja Cements). The value for the Holcim stake and open offer consideration for Ambuja Cements and ACC is $10.5 billion, which makes this the largest acquisition by Adani, and India’s largest-ever merger and acquisition transaction in the infrastructure and materials space.
This acquisition marks the group's foray into the cement sector which is currently having tailwinds due to the government’s focus on infrastructure and revival of housing demand.
Ronald Siyoni, AVP-research, Sharekhan by BNP Paribas said, “Holcim’s combined Indian capacity at around 70MTPA is valued at $159 per tonne which we believe is higher than the replacement cost. The premium of 7 per cent and 9 per cent assigned to Ambuja Cements and ACC stock prices is positive for both the stocks.” Shares of ACC settled 3.94 per cent up at Rs 2197.05 on May 16, while the benchmark BSE Sensex closed 0.44 per cent higher at 53,023.57. Shares of Ambuja Cements closed at Rs 367, up 2.29 per cent against the previous close.
Market analysts added that the acquisition would place Adani group at the number two position in India’s cement sector. “Over the longer term, we expect it to positively impact the cement sector with expectations of industry consolidation along with better pricing discipline,” Siyoni added.
Yogesh Mehta, founder, Yield Maximisers added that it is just an opportunity and entry into the cement sector via Brownfield's acquisition of Holcim. ACC and Ambuja Cement have a total combined capacity of 66 mt. The acquisition may add Rs 1.1 lakh crore in the group’s market capitalisation,” Mehta added.
In terms of financials, Adani Group of companies posted a gross sales and net profit of over Rs 1,82,000 crore and Rs 12,000 crore, respectively, for the year ended March 31, 2022. On the other hand, ACC and Ambuja Cements posted gross sales of Rs 15,814.40 crore and Rs 28,965.46 crore, respectively, in FY21. The net profit of ACC and Amabuja Cements stood at Rs 1851.45 crore and Rs 3690.81 crore, respectively. They are yet to announce their financial results for FY22.
Santosh Meena, head of research, Swastika Investmart said, “The acquisition aligns with group’s focus on infrastructure and synergistic to its other businesses like power, coal and energy, ports and logistics. The cement sector will see additional consolidation and increased competition as a result of this acquisition.”
Commenting on the prospects of ACC and Ambuja Cements, Ravi Singh, vice president and head of research, Share India said, “The transaction would help the companies slash costs, trim debt and better cope with the soaring energy prices and weaker demand that have hurt the sector so far. Also, post the potential merger, there could be a consideration for brand consolidation leading to better margins and higher return on capital employed for the two companies. ACC and Ambuja both stocks are good for long term investment with a target of Rs 2,450 and Rs 420 respectively.”