Orient Cement's C K Birla approaches Gautam Adani for cement business stake sale: Report

Industrialist C K Birla has approached Ambuja Cement-owner Gautam Adani to sell his promoter stake in listed Orient Cement, a report in the Economic Times said on Wednesday. Birla, chairman of multinational conglomerate CK Birla Group, has reportedly turned down offers from other domestic players as it did not match his valuation demand. JP Morgan was previously engaged by Birla to find a buyer for his business.

The report said senior management executives on both sides have already met to discuss a potential deal for the Adani Group.

At present, the Birla family and private investment vehicles hold a 37.9 per cent stake with a market value of Rs 3,890 crore. The stock has seen a 65 per cent jump so far this year.

As per the report, the stake sale can trigger an open offer for an additional 26 per cent stake in accordance with takeover laws, requiring the incoming promoter (Adani Group) or controlling entity to purchase the additional shares from existing minority investors.

Orient Cement is engaged in the manufacturing and sale of cement. Its manufacturing units are located at Devapur in Telangana, Chittapur in Karnataka and Jalgaon in Maharashtra.

In July this year, Orient Cement entered into a Share Subscription and Shareholders’ Agreement with Ardeur Renewables Private Limited and Cleantech Solar India OA 2 Pte Ltd for acquisition of 28.52 per cent stake in the share capital of Ardeur Renewables for putting up two solar power plants with capacity of 16 MWdc in Karnataka (Project 1) and capacity of 5.5 MWdc in Maharashtra (Project 2), under Captive Scheme, Orient Cement said in its FY23 annual report.

On the other hand, Adani Group recently acquired a majority stake in Sanghi Industries Ltd at an enterprise value of Rs 5,000 crore. The acquisition includes a cement plant and captive jetties in Gujarat which will allow Ambuja to directly transport its products through the coastal route to states like Maharashtra, Karnataka and Kerala.

Sanghi’s cement factory, located in Gujarat’s Kutch region, is India’s largest single-location cement and clinker unit by capacity, per a statement from Ambuja.

Last year, the Gautam Adani-led group paid $6.4 billion in cash to acquire Switzerland-based Holcim’s 63.1 per cent stake in Ambuja Cements and 54.5 per cent holding in ACC Limited.

With the acquisition of Sanghi Industries, Adani Group will increase to 73.6 mtpa from 67.5 mtpa, taking it closer to the 140 mtpa capacity of the country’s largest cement manufacturer, UltraTech Cement.

Shares of Ambuja Cement were trading at Rs 435.80, down by 1.5 per cent, while Orient Cement stock was trading at Rsv 208.05, up by 10 per cent.  

Considering the strong focus on the housing and infrastructure sectors in the FY24 budget, demand for cement in India is predicted to grow by 8-10 per cent. This includes investments in road, rail, port, housing and other critical infrastructure development. Consequently, demand for cement is expected to soar to support these projects.

Also read: Orient Cement shares climb 8% on report CK Birla approaches Gautam Adani for stake sale

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