As the competition between Adani Group’s Ambuja and Aditya Birla Group’s UltraTech for dominance in the cement sector heats up, the south India market has become a battleground with multiple acquisitions at increasing enterprise value per tonne.
The latest acquisitions – Orient Cement by Ambuja and India Cement by UltraTech – have been at far higher valuations than the other recent buyouts as the two major players vie for the top spot in the core infrastructure sector.
While Ambuja’s deal with Orient has an enterprise value of Rs 8,100 crore at Rs 9,591 per tonne, Ultratech’s acquisition of India Cement is at Rs 9,831 per tonne. Both the deals have been at higher valuations than those before them – Penna Cement by Ambuja (EV of Rs 6,595/tonne) and Kesoram Cement by Ultratech (EV of Rs 7,587 per tonne).
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“Ambuja Cements’ consolidated capacity in South India is likely to rise from ~10 million tonne in FY24 to ~27 million tonne by end-FY25E,” Elara Capital said in a report. This makes it’s the second-largest player in the south market.
However, it has a while to go before it closes the gap with industry leader UltraTech, which has around 50 million tonne per annum (MTPA) capacity in the south market (including India Cements and Kesoram capacities).
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Analysts also pointed out that even with the higher EV/tonne, the Orient Cement acquisition is ahead in terms of asset quality. The CK Birla-promoted firm’s Ebitda/tonne as at the end of FY24 was Rs 733, compared to Rs 501 for Kesoram and Rs 115 for India Cements.
“Orient Cement has a coal-based thermal power capacity of 95 MW, 10 MW waste heat recovery system (WHRS) and 33 MW renewable energy, out of which ~20 MW is under commissioning. Also, its entire limestone reserves are at a nil premium,” Elara Capital analysts said.
Analysts added that Ambuja could see a potential to further improve operational efficiency through increased use of green power and domestic coal linkage,
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