Ambuja Cements Eyes Major Capacity Boost with Potential HeidelbergCement Acquisition

The possible acquisition of HeidelbergCement India is anticipated to result in a substantial increase in Ambuja's production capacity from its present level of 89 million tonnes, as the Adani group company aims to reach 140 million tonnes by 2028.

Following reports that the Adani Group is in talks to buy HeidelbergCement India and Zuari Cement from the German parent company, Ambuja Cements shares began well on Monday, increasing more than 1%, while HeidelbergCement India's price surged more than 13%. The transaction may be worth up to ₹10,000 crores, according to The Economic Times, which cited anonymous sources.

The share price of Ambuja Cements was up 1.4% from its previous close of ₹610.7 at opening, trading at ₹619.35. In the past year, the stock has increased by more than 42%, bringing its market capitalization to ₹1.5 lakh billion. The benchmark NSE Nifty 50 share price, which has increased by 28% during the same time, has been greatly exceeded by the share price of Ambuja Cements. The business has ₹18,299 crores in cash and cash equivalents as of June 30, 2024.

The shares of HeidelbergCement India surged to ₹219, slightly higher than their closing price of ₹219 on Friday. The market capitalization of the company, which has increased by 16 percent over the past year, is currently about ₹5,000 crores. It hasn't done as well as the Nifty.

Increased merger and acquisition activity has been observed in the Indian cement industry, with large firms Ambuja Cements and UltraTech Cement actively purchasing smaller players.

Ambuja's production capacity, which is now 89 million tonnes, is anticipated to increase dramatically with this possible acquisition, as the Adani Group company aims to reach 140 million tonnes by 2028. With the acquisition, Ambuja Cements will now own the 14 million tonnes of production capacity of HeidelbergCement India and the 7 million tonnes of Zuari Cement.

According to the Economic Times story, should the process escalate into a full-fledged bidding battle, the Adani Group may withdraw. A different news source from earlier last week said that JSW Cement and UltraTech Cement, two more formidable competitors, would join the race to buy HeidelbergCement India.

The notion that HeidelbergCement's activities in India may be transferred has been discussed previously. Reports surfaced in October 2023, exactly one year ago, indicating that Heidelberg's Indian assets were also of interest to UltraTech Cement and JSW Cement.

Also Check Cement Sector Stocks List

To Summarize

The Adani Group, which owns Ambuja Cements, is reportedly in talks to acquire HeidelbergCement India and Zuari Cement from their German parent company, potentially expanding Ambuja’s production capacity from 89 million tonnes to an ambitious 140 million tonnes by 2028. This acquisition, valued at up to ₹10,000 crores, would add 21 million tonnes of capacity through HeidelbergCement and Zuari Cement, making Ambuja a dominant player in India's cement market. News of the potential acquisition lifted Ambuja Cements' stock by over 1% and HeidelbergCement India's by 13%. Currently, Ambuja’s market cap has risen to ₹1.5 lakh crore, a substantial 42% increase over the past year. However, other industry giants, including UltraTech Cement and JSW Cement, are rumored to be eyeing HeidelbergCement, suggesting a competitive bidding process ahead. Should a bidding war escalate, the Adani Group may reconsider its participation, according to sources.