India’s UltraTech Cement said on Thursday it will buy the cement business of Kesoram Industries (KSRM.NS) in an all-stock deal valued at Rs 5,379 crore, in a move to add heft to its hold in the southern part of the country.
As a part of the deal, UltraTech will issue one share for every 52 shares of Kesoram and give UltraTech ownership of two integrated cement units in the southern Indian states of Karnataka and Telangana.
The deal implies an offer price of 173.15 rupees per share, a 24.2 per cent premium to Kesoram’s last close.
Market leader UltraTech is looking to boost its capacity ambitions in a highly competitive Indian cement sector, months after smaller peer Ambuja Cements, owned by billionaire Gautam Adani, bought a majority stake in Sanghi Industries.
“UltraTech already has one of the best brownfield potential in the industry. This deal, if it does go through, would be additive to that and help cement its capacity lead over others, even as other players with larger ambitions ramp up,” said Satyadeep Jain, research analyst at Ambit Capital.
The transaction, expected to be completed within 9-12 months, will provide the company “the opportunity to extend its footprint in the highly fragmented, competitive and fast-growing Western and Southern markets in the country,” UltraTech said.
The proposed transaction will accelerate UltraTech’s path to achieving its stated goal of 200 million tons per annum (mtpa) cement capacity in India, it added. According to the company’s website, it currently has a consolidated capacity of 137.85 MTPA, with 23 integrated manufacturing units.
With this deal, Kesoram would be left with its smaller business segment – rayon, transparent paper and chemicals.
