Ambuja Cements, an Adani Group, said that it had decided to acquire a 46.8% stake in Orient Cement in an all-cash deal worth ₹8,100 crore, to be executed at a price of ₹395.40 per share and valuing $4.8 per share. The development has been showcased through a regulatory filing on October 22, marking this move as a strategic expansion of Ambuja Cements’ operational capacity.
For the acquisition, Ambuja will employ its internal accruals. Upon its completion, Ambuja to acquire Orient Cement will add 8.5 million tonnes of cement production capacity per year to the company. The company’s total capacity will stand at 97.4 million tonnes per year with a focus on south and west India mainly. Ambuja plans to achieve an operational capacity of 100 million tonnes per year by the end of FY 2024-25.
Ambuja to acquire Orient Cement but experts think this will be a play down deal
As Ambuja is to acquire Orient Cement, market sources believe this deal will not make much noise in demand for seaborne petcoke. Even though Orient Cement’s capacity increases, demand for petcoke remains subdued with high inventory levels and a slower-than-expected pace of construction activities in India.
Petcoke prices have tumbled to fresh lows. The CFR India 6.5% sulfur US petcoke traded down to near four-year low at $93/mt by mid-October, from their 2014 highs of $110/mt in August. Ambuja to acquire Orient Cement: Construction activities to gain pace and pick up the pace in the next quarters; petcoke demand to remain weak till then.
Consolidation in the cement sector of India is increasing through mergers and acquisitions. Ambuja’s acquisition of Orient Cement is an example, while consolidation also continues with major players such as the Adani Group, which acquired ACC Cement, expanding further by forcing regional players to augment capacity and achieve greater logistical efficiency. This consolidation should not directly add up to increase demand for petcoke but certainly increase cement sales over the coming years.
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