Adani Group’s open offer for 26% stake each in Ambuja/ACC expired on September 9. With these shares moving beyond the open offer price over the past fortnight, only 2.2% of ACC and 0.04% of Ambuja Holdings were tendered by minority holders.
With the acquisition process largely lagging behind, global brokerage Jefferies believes that the focus of the group (and investors) should now be on cement business strategy, pace of change on efficiency and growth outlook going forward. The brokerage has given buy rating on ACC and hold rating on Ambuja Cements shares.
In May this year, Adani Group Announced the acquisition of Holcim’s stake in Ambuja (63.19%) and stake in ACC (4.48%; Ambuja directly holds ~50% stake in ACC). “The acquisition triggered an open offer of 26% in both the shares as well. The deal value, including an open offer of $4 billion, was pegged at $10.5 billion, which means a rich valuation (EV/T) of $160-170 per tonne.
With the acquisition largely complete, the focus is on the group’s forward strategy. At the recently concluded Jefferies Asia Forum, the CFO of Adani Group highlighted that the group intends to close the ACC-Ambuja transaction within a period of next 10 days and will focus on the group’s capability to do so.
“We believe the Street is now eagerly awaiting the blueprint of how the Group is driving the synergy in the cement business and outlook on expansion. Post the acquisition, Adani Group Chairman in an interview with Fortune India said That the group is planning to expand to 100MTPA/130MTPA in the next 3-4 years/5-6 years as against 67MTPA at present.”
While Jefferies is excited about the new promoters taking over, an important issue is to monitor the pace of implementation of the Adani Group’s strategy. Adani’s purchase Ambuja Cements/ACC brings some low-hanging fruit for Adani on cost-savings opportunities, better procurement, logistics and brownfield expansion – which could drive earnings growth faster than peers for these companies, Jefferies added.
Ambuja Cements and ACC currently have a combined installed production capacity of 70 million tonnes per annum. Both the companies have 23 cement plants, 14 grinding stations, 80 ready-mix concrete plants and more than 50,000 channel partners across India.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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