India's leading cement producer, UltraTech Cement, has entered into a share-swap agreement to acquire Kesoram Industries' cement assets for an enterprise valuation of Rs 7,600 crore. The deal, recently approved by UltraTech's board, involves issuing one UltraTech share for every 52 shares of Kesoram. The transaction, valued at Rs 7,600 crore, incorporates debt of approximately Rs 1,700 crore. The acquisition, anticipated to conclude in 9-12 months pending regulatory approvals, showcases UltraTech's strategic move to maintain its leadership position in the competitive cement industry.
Kesoram Industries' shares experienced a consecutive upper circuit breaker, surging by 15.74% from Rs 120.19 on November 24 to Rs 139.11 on November 30. Meanwhile, UltraTech Cement's shares rose by 5.33% to Rs 9,000.65 during the same period. Under the agreement, UltraTech will issue 5.97 million new shares to Kesoram's shareholders, increasing UltraTech's equity capital to Rs 294.66 crore, comprising 294.7 million shares of Rs 10 each.
This strategic acquisition allows UltraTech, an Aditya Birla Group company, to expand its presence into the competitive and rapidly growing western and southern markets. Notably, UltraTech currently lacks a cement manufacturing plant in southern markets like Telangana. The deal is expected to bring about economies of scale, leveraging synergies in procurement, logistics, and fixed costs. Upon completion, UltraTech's cement capacity will reach 149.14 million tonnes per annum (MTPA), including overseas operations.
Kesoram Industries, operating in sectors such as cement, tyres and tubes, heavy chemicals, and spun pipes, markets its cement under the brand Birla Shakti. The acquisition includes Kesoram's cement business, which comprises two integrated units in Sedam (Karnataka) and Basantnagar (Telangana) with a total capacity of 10.75 MTPA. This capacity includes 8.50 MTPA of clinker-backed capacity and 2.25 MTPA of surplus grinding capacity. Additionally, there is a 0.66 MTPA packing plant in Solapur, Maharashtra.
UltraTech's move aligns with its larger goal of achieving a cement capacity of 200 MTPA in India. The transaction remains contingent on various approvals, including those from shareholders, creditors, stock exchanges, and regulatory authorities. The deal strengthens UltraTech's position in the industry and accelerates its expansion plans, complementing its recent approval for a Rs 13,000 crore investment to increase capacity by an additional 21.9 MTPA. This expansion involves setting up greenfield and brownfield plants as part of the company's third phase of growth, along with the establishment of greenfield bulk terminals.
