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In a strategic move to solidify its position as India's leading building materials manufacturer, UltraTech Cement, a subsidiary of the $65 billion Aditya Birla Group, has entered into an agreement with N Srinivasan and his family to acquire their stake in India Cements for Rs 3,954 crore. This acquisition represents a significant step for UltraTech, as it seeks to expand its footprint in the highly fragmented and rapidly growing southern market, particularly in Tamil Nadu, where it currently has limited presence.
The deal involves UltraTech purchasing approximately 33% of India Cements, valuing the Chennai-based company at Rs 390 per share. This acquisition complements the 23% stake UltraTech acquired in June. In accordance with India's takeover regulations, UltraTech will initiate an open offer to public shareholders of India Cements, aiming to acquire an additional 26% stake at the same price. This open offer will increase the total cost of the acquisition for UltraTech to Rs 7,100 crore.
The scarcity of limestone in Tamil Nadu has historically hindered UltraTech's ability to establish new integrated units in the state since acquiring its last unit in August 1998. This acquisition provides UltraTech with access to India Cements' 14.5 million tonnes of capacity, distributed across Telangana, Andhra Pradesh, and Rajasthan. This acquisition will further bolster UltraTech's existing capacity of 153 million tonnes and add 1,855 employees to its workforce. Notably, India Cements boasts a 6 million tonne capacity in Tamil Nadu, exceeding UltraTech's existing 1.4 million tonne capacity in the state. This acquisition positions UltraTech to effectively serve the southern market, accelerating its trajectory toward surpassing 200 million tonnes of capacity.
The acquisition comes amidst a competitive landscape within the cement industry, with Ambuja Cements, a subsidiary of Gautam Adani's enterprise, vying for the top position. Ambuja currently holds a capacity of 89 million tonnes. The acquisition of India Cements marks a continuation of Birla's strategic investments in the sector, following the acquisition of a 23% stake from billionaire investor Radhakisan Damani for Rs 1,885 crore at Rs 267 per share. Subsequent to this financial investment, UltraTech was approached by the promoters of India Cements, who expressed interest in selling their stake in the company.
Srinivasan joined India Cements after the passing of his father and co-founder in 1968. Currently serving as Vice Chairman and Managing Director, Srinivasan, at 79, is facing health concerns. His wife and daughter, Rupa Gurunath, have expressed no interest in assuming leadership of India Cements. The trio will relinquish their board positions upon completion of the acquisition. India Cements has navigated financial challenges in recent quarters, with the Enforcement Directorate conducting searches at its offices earlier this year in connection with foreign exchange transactions. The company has undertaken efforts to restructure its balance sheet to mitigate losses, modernize its older plants, and address working capital requirements.