Ultratech To Acquire 23% In India Cements,Consolidating In The Cement Space | Business News | ET Now

Rakesh Arora now is joining us, an expert in the cement space. He's been talking about prospects of more consolidation and clearly some of it is evidence coming in today. Rakesh, morning. Thanks for your time. Ultratech has finally bought out 23% of India's cements, though they call it still a financial investments. What do you make of this deal and do you see more happen? Anything on radar prospect by, you know, by buyout candidates? So see both Adani and Ultratech have been, you know, trying to gain market share. And so consolidation in the tremendously is, has been, you know, ongoing process. Now particularly in South India, there's been a lot of stress and because of our capacity and cement prices were not diminutive enough. So companies like India Cement were making losses. So it is a matter of time that, you know, these guys get consolidated by the larger players. Though I'm a little bit surprised by this deal given that this is not a textile. They normally go for a majority and a full consolidation. So we have to wait and see who is the seller. If the seller is a large shareholder in that India Cement, then probably it is an exit to him. But you know, we have to wait and see. We need more details to really figure out why this would happen. In fact, I think our education, the money was a large holder. If he may have sold out, it'll be interesting to see. But I want to talk about the Grasim she cement, some of the big ones, Dalmia's and of course Ambuja ACC. Which side do you find more comfort in the strategy and numbers? See Ultratech is undoubtedly the number one and they are a well ordered machine. Not only they are the largest but they're still growing at one of the fastest among the industry have good, you know cost efficiencies etcetera. So Ultratech is by far the number one and obviously Adanis are trying to Ambuja in ACC and they have made two very good acquisitions, Sanghi and Pena Cement, which really fits into their, you know, our plan of being the lowest cost producer. And so Ultratech is by far the number one. And Booja and HCV are a little bit of a distant #2 Tony, as well as joining in from Sharekhan. Ronald, would you concur with this assessment? And what's your outlook on the back of a number of acquisitions by Ultratech? Now we understand at 267 a share, it's going to be India cements. Yeah, hi. Yeah. So yes, the the financial investment which they have categorized, you know it, it set a good value of you know, little less than $65 per ton to about $63 per ton. Also Ultratech share, if you see in the Southern region, the capacity share is 15% and its share in the industry is just 11%. So it makes sense for Ultratech to you know increase its presence in Southern region which is the lowest until now in the whole world all on a pan India basis. So, but we need to see you know, if it goes for further increase in stake and controls the company at what valuation the, you know, if at all the acquisition is done for further stake buying. But the first step is very positive in terms of the value given to the company and you know, their overall presence in the southern region. It would you know improve overall with assets largely in the South and Northern region. Just wanted to get in a sense from you as to what you believe this could potentially mean for the the entire cement space and the kind of consolidation that we're witnessing at large. So consolidation is anyway you know has been a positive or a key trigger for the cement space as a whole. And you know, if this express consolidation of you know such kind of capacities are undertaken, then it may you know help in delay in some of the green pillar ground fill expansions which this larger companies are planning. So in a way the consolidation through larger capacities will help the overall industry and you know also would help in terms of rising discipline going forward. So yes, it's a very key positive trigger for the sector as a whole. Ronald, just quick word from here on, we all know what is happening in the cement space, valuation, etcetera. In the scenario, which are the two or three most attractive names in your view? Active Ultratech has been leading, you know, currently it's trading at more than 18 times CV to a beta and FI 26 earnings. So no. But still it's below its historical peak multiples. Apart from that three is that, you know, discount to Ultratech, which was to trade at premium. So it has been a little bit laggard at around 14 times CV to a beta and Dalmia, Ramco, JK Luxmith Cement this are, you know, ranging from 9 to 1310 CV to Emita multiples. So still apart from Ultartech, other players, you know, in our coverage space has to catch up on the valuation front. But it all depends, you know, what kind of numbers they come up. But definitely there is room for upside or re rating in multiples for this companies as well. Alright gentlemen gonna let you go on that note. Thank you so much for joining in and sharing with us your thoughts on that news. Do remember the stocks are both in the spotlight in today's trading day. On the back of that news of Ultratech Cement acquiring India Cement at 267 per share, there was a block deal that took place in India Cement as well. A 20% equity had traded on that. If you like this video then like, share and subscribe to ET Now.