UltraTech Cement Enters Race To Buy Ambuja, ACC; Adani, JSW Already In Fray

The country’s largest cement manufacturer UltraTech Cement has entered the race to acquire Swiss firm Holcim Ltd’s Indian arms Ambuja Cements Ltd and ACC Ltd by submitting a non-binding bid, according to a livemint report quoting sources. Adani Group and JSW Group are also competing in buying the companies.

Companies that are seeking to acquire Ambuja Cements and ACC are finding it difficult to price their bids as the Swiss company has allowed them limited access to inspect the assets of the two companies, according to the report. A report by Business Standard said JSW Group Chairman Sajjan Jindal is betting USD 4.5 billion of his personal fortune in the firm’s bid for Ambuja Cements.

“Given the nature of the business, one needs to conduct proper diligence of the companies’ assets, especially limestone linkages, since they are critical for day-to-day operations and growth. Having significant limestone reserves is critical for any cement business and, thus, the reserves feed significantly into the valuation. New reserves can only be bought through auctions or by acquiring a company,” according to the livemint report quoting one of the sources.

Recently, Bloomberg also reported that billionaire Gautam Adani’s group is in advanced talks to acquire Holcim Ltd’s businesses in India. The Adani Group may sign an agreement to acquire a controlling stake in Ambuja Cements from Holcim as soon as in the coming days, it said.

As per media reports, ArcelorMittal is also evaluating a bid for Ambuja Cements but this could not be independently confirmed.

Holcim controls 63.1 per cent of Ambuja Cements. The former has been considering the sale of its stake in the latter. ACC Ltd is Ambuja’s subsidiary. The combined market value of Ambuja Cements and ACC currently stands at over Rs 1.11 lakh crore.

“We believe that these assets (Ambuja and ACC) will command a significant premium given the quality of brands, country-wide reach and large capacities,” according to analysts at Nirmal Bang Institutional Securities. They added that at the current valuation, they do not see too much upside for Ambuja but in case of corporate action taking place, aggressive bidding and possible aggressive growth over the next 10 years will make this company attractive again.

During the March 2022 quarter, Ambuja Cements reported a 30.26 per cent decline in its consolidated net profit to Rs 856.46 crore on account of rising fuel prices. Its standalone Ebitda stood at Rs 7,900 crore in the first quarter of the calendar year 2022, fell 19 per cent on a year-on-year (y-o-y) basis but was 16 per cent ahead of consensus estimates.

Ebitda stands for earnings before interest, tax, depreciation and amortisation. The company follows a January to December accounting year.

“The January to March 2022 quarter was impacted by rising fuel prices due to which Ebitda during the quarter was lower by 19 per cent. This was partly mitigated by boosting efficiencies. Supported by the Master Supply Agreement with ACC, we further reduced our logistics costs,” Holcim India MD and Ambuja Cements CEO Neeraj Akhoury had said after the results announcement.

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