Orient Cement shares zoom over 5% amid UltraTech’s plans of acquisition

UltraTech is said to have offered a price of Rs 350-375 per share, a 22% premium to the current market price of Rs 307. In the past month, the has shot up 45%, hitting an all-time high of Rs 329 on July 1, largely on speculation that an acquisition deal was near conclusion.

Kumar Birla's renewed efforts to buy Orient are seen as an attempt to trump Adani Cement and consolidate UltraTech’s position in the southern and western markets, especially Maharashtra and Telangana, after buying a 23% stake in at the end of last month. Adani Cement, which controls India's second-largest cement capacity, has been engaged in talks with CK Birla since late last year but is said to have baulked at the valuation sought.

The promoter stake in Orient Cement held by the Birla family and private investment vehicles is 37.9%. The company has a market value of Rs 6,417.51 crore, having almost doubled from Rs 3,878 crore in October when ET had first reported on CK Birla’s approach to Adani.

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The UltraTech offer translates to an enterprise value of Rs 7,300-7,800 crore ($840-$938 million) or $109-110 per ton based on Orient Cement's current installed capacity of 8.5 million tons per annum, aligning with recent transactions in the range of $90-110 per ton for mid-tier companies.

The India Cement investment by UltraTech at Rs 267 a share also translates to $93 per ton. Last month, the Adani Group, through Ambuja Cement, acquired South-based Penna Cement at $90 per ton. UltraTech acquired the cement assets of at a $91 per ton valuation and those of in November 2023 at an implied valuation of $95 per tonne through a share swap.

Adani’s offer was also contingent on obtaining environmental clearance for the expansion phase in Telangana, which the current Orient management was unable to commit to definitively, according to sources’ citation to ET.

A formal announcement is expected before or during Orient Cement's upcoming quarterly earnings scheduled for July 19. However, the final valuation is still being worked upon and the deal may not happen if there’s a mismatch, said the people cited to ET.

A successful closure will accelerate Birla’s plans to achieve a 200 million tons per annum (MTPA) capacity for UltraTech by 2027. At the end of May 2024, UltraTech's capacity stood at 152.69 MTPA, excluding Kesoram's capacity of 10.75 MTPA

Meanwhile, the shares of were trading flat at Rs 11,925 around 10:00 am.

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