Orient Cement, Ambuja Cements shares rally up to 10%, ACC drops; here's why

Shares of Orient Cement and Ambuja Cements jumped up to 10 per cent, while those of ACC Ltd were trading lower in Tuesday's trade after the Adani group companies announced a merger scheme where Orient Cement and ACC would merger with Ambuja Cements. The scheme details hinted at gains for Orient shareholders, not so for ACC as the stock trades at discount to Ambuja Cements. 

For every 100 equity shares held in ACC, eligible shareholders will receive 328 equity shares of Ambuja Cements, while for every 100 equity shares held in Orient Cement, shareholders will receive 33 equity shares of Ambuja Cements.

Shares of Orient Cement climbed 9.85 per cent to hit a high of Rs 180 apiece in early trade. ACC shares fell 0.8 per cent to Rs 1,761.40 apiece. Ambuja Cements added 2 per cent to Rs 550.85 apiece. 

Emkay Global said the deal is mildly positive for Orient Cement shareholders, implying around a 9 per cent premium to the prevailing share price. It sees the transaction as broadly neutral, with a slight negative bias for ACC shareholders. 

"We view this restructuring to be largely value neutral for Ambuja Cements as consensus seems to be building meaningful costs savings/ margin expansion for Ambuja Cements over FY26-28E. We maintain BUY with unchanged target price of Rs 690 based on 17 times 1HFY28E consolidated EV/Ebitda," Antique Stock Broking said.

The proposed transaction is expected to be completed over the coming year, with the appointed date as January 1, 2026, for ACC and May 1, 2026 for Orient Cement, for the proposed merger. 

The Scheme of Amalgamation of Sanghi Industries and Penna Cement with Ambuja Cements is also at different stages of approval. Post approvals, all stakeholders will engage with a single, unified company. 

Analysts noted that the MSA mechanism will cease to exist following the merger of the subsidiaries with Ambuja Cements. The ‘Adani Ambuja Cements’ and ‘Adani ACC’ brands will continue to operate as usual, with their leading product brands in respective markets. Post merger, ACC’s current incentives from Maharashtra, Madhya Pradesh, and Uttar Pradesh will continue to accrue to Ambuja Cements for the remaining period of the incentive scheme.

MOFSL said the announcement was a positive development, as it came against the backdrop of steady improvement in Ambuja Cements’ operating performance. 

"Though the deal appears to be neutral for ACC, we believe that it is positive for ACEM shareholders, as ACC trades at a steep discount to ACEM. At CMP, ACEM trades at 15.4x FY27E EV/Ebitda and $128 FY27E EV/ton, while ACC trades at 7.1 times FY27E EV/Ebitda and $71 FY27E EV/ton. This deal also removes the uncertainties about the merger timelines (subject to regulatory approvals) and would help to create a single pure-play cement entity for the Adani group," MOFSL said.