UltraTech Cement, India’s largest cement manufacturer and a flagship company of the Aditya Birla Group, has agreed to acquire a significant 23 percent stake in India Cements for up to Rs 1,885 crore. This move is aimed at bolstering UltraTech’s foothold in the lucrative southern market, where it currently holds a modest market share of around 10-11 percent despite its dominant position nationwide with a 23 percent market share.
Prior to this transaction, India Cements was partially owned by veteran investor R.K. Damani, who has sold his entire 20.8 percent stake in the company. The deal, priced at Rs 267 per share, marks UltraTech’s strategic push to consolidate its operations in the southern region, which is characterized by a fragmented market with numerous small and mid-sized players.
India Cements, a major player in South India, operates clinker and cement capacities across Telangana, Tamil Nadu, Andhra Pradesh, and Rajasthan, totaling 11.1 million metric tonnes (MT) and 14.5 MT respectively. Despite its substantial capacities, India Cements has struggled with lower operating margins compared to its peers, attributed to various operational factors.
The acquisition by UltraTech could potentially unlock synergies in cost efficiency and distribution networks, leading to significant margin expansions for India Cements. Analysts anticipate that UltraTech might further increase its stake in India Cements and could potentially launch an open offer in the near future to gain operational control.
The cement industry in India is witnessing a wave of consolidation, with several strategic acquisitions in recent months. Ambuja Cements, owned by the Adani Group, recently acquired Penna Cement with a capacity of 14 MT, signaling robust expansion plans in the competitive market. The intensified rivalry between UltraTech and Ambuja reflects their ambitions to enhance production capacities substantially by 2028, with UltraTech targeting 200 MT.
As UltraTech cements its position in the south through India Cements, the sector anticipates heightened competition and strategic maneuvers as major players vie for market dominance amid evolving industry dynamics.
