Ultratech Cement Acquires 23% Stake In India Cements Amid Industry Consolidation | BNSN Lens

Now let's take a look at what are the which are the stocks that are moving in trade, which are the stocks that are hogging the limelight. And like Shristi said, yes, we will be talking about the cement pack as a whole, in particular about what is exactly happening with Ultratech and India Cement. Ultratech will be looking to buy 23% stake in India Cements. Today we had about 20% block deal take place. So we will have Samit join us in a short while from now. In fact, we already have Samit here. So let me ask Samit about the entire deal and Samit, what's the deal all about? Because we were amazed. We all, there were news floating around about India cements, right? But Ultratech Cement, it was a big one, isn't it? So we need to understand one thing here is that we all knew that India Cement is on the blog and that is because the plans were old operationally, they were not fined. They had debt issue. Working capital always was an issue for India Cement but nothing of this is changing with this deal because Ultratech is buying some from someone from open market. We do not know who the seller is so far from India Cement but what? So that is one thing. Now they are looking to buy 23% stake but they would not be infusing any funds into India Cement. So anything bad that was happening with India Cement right now, that does not change for them. So that situation still remains. Now they are buying this stake at a price of around ₹267. The total cash consideration for Ultratech comes to around 1900 crore rupees, which is a very small amount for Ultratech at this moment. And the deal valuation is spec that the EV2 EV per ton valuation comes at around $91.00 per ton. Now, is it expensive? Well, obviously given the 20% move that we have seen, 2025% move that we have seen in India Summit in the last three sessions, obviously this deal comes in a bit expensive for Ultratech. But at current market price, yes, it's pretty much in line. But given the sharp move that we have seen, now, how will this deal benefit Ultratech? At this moment, it is just a financial investment and not a strategic investment. So they're not looking to merge India Cement into Ultratech. They're not looking to acquire majority stake into India Cement at this moment. So at this moment, this will have no benefit to Ultratech. But we also need to keep in mind that Ultratech Cement is a pan India player. They have around 23% market share as of FY24. But of this 2423% market share that they have in India, the lowest share is coming in from the southern region. And do remember that India Cement has a strong positioning in the South market. So if at all Ultratech looks to merge or looks to completely acquire India Cement, this will definitely benefit the southern market or improve the southern market share of Ultratech, of Ultratech going forward. Summit, you were explaining to us the deal, what it means for Ultratech, what it means for India Cement and looks like right now the way how the acquisition is done, they are categorically saying there's a financial investment. Yes, it's a financial investment as and as you were mentioning outside and we were speaking about it, it's like a real life example where one is still standing in the bus and just keep booking its seat. So they might look to acquire majority state because that is what they would want to do. They are into acquisition spree, they are into consolidation spree. They want to increase their capacity and they want to increase the presence in the southern region and this looks like a good option. At this moment they are not acquiring it, but they're just booking it that they will acquire it in future. Alright, So that is the key take away coming in from Ultratech buying that or looking to acquire 23% in India cements. Remember today 20% block deal is what is taking place in India cement SHT. So an interesting space to watch out for, but a lot of consolidation in the cement pack, isn't it? Well, yes, certainly, Cheryl, we have seen some of the big deals happening in the cement pack and some of the leaders are definitely getting bigger and actually going ahead and making their presence strong in some of the weaker markets. But with that, let's move, move forward and let's also hear out the experts stake. We spoke with Rakesh Arora of Goinde Advisors and Ronald Sayoni of Share Khan and they talk about Ultratech stake acquisition of India Cements and discuss the likely impact of this move. Listen, 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 in the 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 direct style. 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 didn't exit to him the financial investment which they have categorized, you know 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. 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, you know, very positive in terms of the value given to the company and you know, their overall presence in the southern region. It would. So those are the experts who are analyzing this deal. But let's, let's ask our experts on what they believe about the cement pack, especially Ultratech in India cement. Right now, we have Khushbura who's joining us on the technicals, while on the fundamentals, we have Vivek Karwa on the show. Very good morning to you, Khush, as well as Vivek. Thank you so much for joining us on the show. And Vivek, let me come first to you. Let me take your view coming in on this particular move coming in from Ultratech are looking to acquire 23% stake in India cements categorically stating that it is just a financial investment, not a strategic investment or so. And we've seen a lot of this consolidation in the cement space. So how should one read into it, See maybe they got a stake of 23 percentage, another two percentage would have triggered open offer as well. So maybe they did not get that 2% and hence they are categorizing it as a financial transaction. But Ultratech is not an equity market investor where they're going to buy the shares of another company and just hold it on. So maybe in future, maybe six months down the line or one year down the line, there might be that they start acquiring more shares and then make it as a subsidiary or merchandiser. So that might happen in future. But one thing is very, very clear we saw Penta cement getting acquired recently by one more big and even Birlas are trying to strengthen their group as such in the market. So if you look at all Birla stocks every every stock in that category has in their group has started doing well. So cement wise as well see when it comes to South India, there are very, very small players available for team board and that reduces the logistic costs of this major companies. So stocks like KCP and all like that. I've been speaking about the stock that's done very, very well. So there are many other companies which are available. So I find that I it is I think that next maybe a few years like telecom we might have just six or seven big players. Telecom, we have only three and in seven also there might be only six or seven players which makes it quite interesting sector and the newcomers would not be coming in, but there might be a huge consolidation. So we're all all goes well. And the kind of focus which government also has on infrastructure and the Avasyujana, I think this space should continue doing well, right? Vivek believes that the space should continue to do well. But Kush, quickly if we can highlight some of the counters that are best placed technically from the cement pack. First of all, very good morning, good morning. It's this Steve, Vivek and hi Cheryl. Well, you know as far as ultratech and investments are concerned, at least technically, you know, the run seems to be done in the near term. It's a good idea to take some money home. As far as the other pics go, two of them, you know among the big names you know you've got the ACC you're also looking at, you know a JK cement. These two seem fairly well placed for you know, and up move ACC might be lacking momentum, but I think from for near term to a medium term perspective, you could look at a three thousand 3100 kind of a level. Also on this one support zone for this one comes in at you know, about 2400 kind of levels. JK Cement also points this one has a bit more momentum than ACC. So this one's on our radar as well. Here we're looking at 5 thousand 5100 kind of, you know, move on the upside. Support for this one comes in at 43142 fifty kind of zones. So these are the two stocks, ACC and JK Cement that you know they are, which are on our radar. As I said, Ultratech and India Cement for the near term, the move seems to be done. So it's a good idea to take the money off the table if you've got an existing position as a view coming in on Ultratech, India Cement, right now, if you look at Ultratech, it is off the day's highest point. But on that note, we if you like this video then like, share and subscribe to ET Now.