Birla’s UltraTech scoops up India Cements amid turf war with Adani

UltraTech Cement Ltd, India’s biggest cement maker, on Sunday bought an additional 32.72% stake in Chennai-based India Cements Ltd for ₹3,954 crore ($472 million), heating up competition in a sector that is set to form the backbone of the next stage of the India story—infrastructure.

The stake purchase comes exactly a month after billionaire Kumar Mangalam Birla’s flagship company bought a 22.7% non-controlling stake in the N. Srinivasan-owned firm for ₹1,889 crore ($225.6 million) via block deals, preventing potential rival bids for the struggling firm. Radhakishan Damani, Gopikishan Damani, Kiran Devi Damani, Derive Investments, and Derive Trading and Resorts sold their stakes to UltraTech in the block deal.

UltraTech’s latest stake purchase takes its total shareholding in the southern Indian firm to 55.49%, triggering a mandatory open offer for another 26% stake.

The open offer for a 26% stake, or 80 million shares, at ₹390 apiece will add up to about ₹3,142 crore ($375 million), taking the total value of Ultratech’s latest two deals to ₹7,096 crore ($847.5 million), and its overall investments in India Cements to about ₹9,000 crore.

The Indian Premier League (IPL) team, Chennai Super Kings, will not be a part of the transaction.

“The India Cements opportunity is an exciting one as it enables UltraTech to serve the Southern markets more effectively and also accelerates our path to 200+ million tons per annum (mtpa) capacity,” Kumar Mangalam Birla, chairman, Aditya Birla Group, said.

Shares of UltraTech Cement Ltd were up 1.75% to ₹11,883.75 at 2pm on Monday on the BSE Sensex, while the broader Sensex index was little changed at 81,291.47. Shares of India Cements were down 0.4% to ₹372.55.

If the deal gets the approval of the competition regulator, UltraTech’s total stake in India Cements, at 81.42%, will breach the 75%-mark set for promoters of Indian listed firms, necessitating either a stake sale or delisting of India Cements.

Turf war in cement sector

Ultratech’s deal points to the race for dominance in the sector between the No.1 and No.2 cement makers.

In 2022, Adani Group entered the sector by acquiring Ambuja and its subsidiary ACC Ltd, and became the second largest cement producer in the country overnight.

Last year, it bought Sanghi Industries for ₹5,185 crore ($620 million) before acquiring Hyderabad-based Penna Cement this year for ₹10,422 crore ($1.24 billion).

UltraTech Cement has a more than 150 mt capacity, adding 50 mt capacity just in the past five years. The company is aiming to increase its production capacity to 200 mt by March 2027. India Cements has a total capacity of 14.45 mtpa. Of this, 12.95 mtpa is in the South (particularly Tamil Nadu), and 1.5 mtpa in Rajasthan.

Last year, UltraTech acquired Kesoram Industries, which has a capacity of 10.75 mt, in a deal valued at ₹7,600 crore ($908 million).

In the year to March 2024, UltraTech Cement reported a profit of ₹135.9 billion ($1.6 billion) on a revenue of ₹698 billion ($8.9 billion), while Adani Cement posted a profit of ₹64 billion ($760 million) on a revenue of ₹331.6 billion ($3.95 billion).

While Ultratech Cement had a production capacity of 150 mtpa, Adani Cement had 79 mtpa.