UltraTech Cement Ltd, owned by the Aditya Birla group, has acquired a 23 percent stake in India Cements Ltd (ICL), triggering speculation about a takeover of the South-based cement major now controlled by N Srinivasan and family. The move marks a further intensification of the battle for control of India’s cement market, which was dominated for long by Kumar Mangalam Birla’s company until the Adani Group entered the sector in 2022 and has since become the country’s second biggest player.

The board of UltraTech approved “making a financial investment” to purchase up to 7.06 crore equity shares of India Cements at a price of up to Rs 267 per share, the Birla firm said in an exchange filing. This non-controlling financial investment constitutes around 23% of the equity share capital of ICL. The move by the Birlas, currently the largest manufacturers of cement in the country, follows the recent acquisition of Penna Cement by the Adani group and aimed at retaining its leadership position in the cement sector.

While the Birla stake falls short of the 26 percent stake required to make an open offer, the current promoters led by Srinivasan could face a takeover attempt as their stake is 28.42 percent. Although UltraTech said it’s purely a non-controlling financial investment, it’s not clear whether the current promoters have supported the Birla’s stake purchase.

Radhakishan and Gopikishan Damani together held 20.78 per cent stake in the company as of March 2024. Although the Birlas did not reveal the name of the seller, market sources said the purchase could be from the Damanis.

On June 13, Adani Group owned Ambuja Cements said it has signed a binding agreement for the acquisition of Hyderabad-based Penna Cement Industries Ltd (PCIL) at an enterprise value of Rs 10,422 crore. Ambuja Cements will acquire 100 percent shares of PCIL from its existing promoter group P Pratap Reddy and family.

Festive offer

The spate of acquisitions by the Birlas and Adani is expected to intensify the battle for market share in the cement sector in the coming days.

India Cements shares jumped by 11.49 per cent to Rs 293.15 on the BSE on Thursday following the announcement by the Birlas. UltraTech shares spurted by 5.07 per cent to Rs 11,714.80.

UltraTech has a consolidated capacity of 152.7 million tonnes per annum of gray cement. It has 24 integrated manufacturing units, 33 grinding units, one clinkerisation unit and 8 bulk packaging terminals.

From a two-plant company having a capacity of just 1.3 million tonnes in 1989, India Cements has grown in the last two decades to a total capacity of 15.5 million tonnes per annum. However, it made a loss of Rs 202 crore on a turnover of Rs 4,942 crore in FY2024.

While N Srinivasan is the Vice-chairman and MD of India Cements, his daughter Rupa Gurunath is an Executive Director of the company and his wife Chitra Srinivasan is a non-executive non-independent director on the board. Srinivasan was earlier Chairman of the International Cricket Council (ICC) and President of the Board of Control for Cricket in India (BCCI).

If the Birlas acquire another three percent and make an open offer, there is a possibility of a hostile takeover of India Cements. However, the Birlas have not given any indication about this option.

UltraTech had announced the acquisition of Kesoram Industries’ cement assets for Rs 7,600 crore last year. UltraTech recently said its expansion program is progressing as per schedule. Work on the second phase of 22.6 mtpa capacity announced in June, 2022, is under progress with capacities commissioned across several locations, it said.

The Adani group has been expanding its footprint in the cement sector. Gujarat Ambuja, with its subsidiaries ACC Ltd. and Sanghi Industries Ltd, has taken the Adani Group’s cement capacity to 78.9 MTPA, with 18 integrated cement manufacturing plants and 19 cement grinding units across the country.