Adani, JSW, UltraTech are in contention for Swiss firm’s India assets

MUMBAI : The board of Swiss cement maker Holcim Group is set to meet next week to decide on the sale of its Indian cement businesses—Ambuja Cements Ltd and ACC Ltd—for which Adani Group, JSW Group and UltraTech Cement are in contention, two people aware of the development said.

“The Holcim board is meeting early next week to consider the future course of action for the sale of Ambuja and ACC stakes, having received interest from the Adani Group, JSW and Aditya Birla’s UltraTech Cement. All three are still in contention for the assets, and nothing has been finalized as of yet. The bids for the two assets are expected to be upwards of $10 billion," said one of the two people cited above.

Holcim owns a 63.19% stake in Ambuja Cements through Holderind Investments Ltd, while Ambuja Cements holds a 50.05% stake in ACC, and Holderind directly owns 4.48%. The companies’ combined market capitalization stood at over ₹ 1.19 trillion as of Tuesday. A stake sale will trigger an open offer to acquire shares from public investors of the companies. A successful sale by Holcim will also make it one of the biggest deals in India.

Meanwhile, bidders have been busy tying up funding for their offers.

“JSW Group arm JSW Cement has the backing of a couple of US private equity funds keen on this opportunity, while Adani has tied up with multiple foreign banks for the funding," said the second person cited above.

“For Adani and JSW, this is a great opportunity to acquire existing large scale cement operations with strong market share. Both groups are expected to chase this deal aggressively as a business of this size won’t be available for many years to come. For Ultratech, Competition Commission approval may prove to be a challenge, given their leadership position in the market," added the second person.

UltraTech has a consolidated capacity of 119.95 million tonnes per annum (mtpa), while JSW Cement has a capacity of 14 mtpa. Ambuja Cement has a cement capacity of 31 mtpa with six integrated cement manufacturing plants and eight cement grinding units across the country, while ACC has a capacity of 34.45 mtpa.

Spokespeople for Holcim and JSW declined to comment, while emails sent to Adani Group and UltraTech Cement did not elicit a response till press time.

Brokerages have a positive outlook on both Ambuja and ACC stocks even as near-term profitability is expected to be weak. “Cement profitability has been hit due to a sharp rise in coal and pet coke costs. We expect most of the impact to be reflected in earnings in the first half of FY23. That said, per our channel checks, there is a likelihood of an 8%-10% price increase in April. Moreover, historically, as costs have softened, companies have retained part of the benefit, leading to margin expansion. Hence, we expect FY23 profitability to be much weaker, but estimate sharp improvement in FY24 in volume and profitability," said CLSA in a report on 7 April. The brokerage has upgraded Ambuja to ‘buy’ while retaining its buy rating on ACC.

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