UltraTech shares hit all-time high on acquisition of Kesoram’s cement biz for ₹7,600 cr

UltraTech Cement shares remain in focus today after the flagship company of the Aditya Birla Group signed a deal with Kesoram to acquire its cement business in an all-stock deal, valued at around ₹7,600 crore, including the debt the company will take on from Kesoram. This is the second deal in two days after the cement major acquired 0.54 metric tonnes per annum (mtpa) cement grinding assets of Burnpur Cement, one of the largest producers of cement in Eastern India, for ₹169.79 crore on November 29.

After gaining 3% in the previous session, shares of UltraTech rose as much as 1.7% to touch a fresh all-time high of ₹9,152 in early trade today. The cement stock opened 1.1% higher at ₹9,100.05 against the previous closing price of ₹9,000.65 on the BSE. The market capitalisation increased to ₹2.61 lakh crore.

The share of UltratTech has risen 38.5% in the last ten months after hitting its 52-week low of 6,605.45 on January 27, 2023. On year-to-date (YTD), the sectoral heavyweight gained 29%, while it climbed 24.5% in a year. The counter added 15.5% in six months and 8% in a month.

In a late evening filing on Thursday, UltraTech said that its board approved the demerger of the cement business of Kesoram in the company in a share-swap deal. As per the release, UltraTech will be issuing one equity share of ₹10 each for every 52 Kesoram shares of ₹10 apiece, implying an offer price of ₹173.15 per share, a 34% premium to Kesoram’s last closing price.

Boosted by the deal, Kesoram Industries shares jumped 5% to get locked in its upper circuit limit at ₹146.05 apiece on the BSE.

On Wednesday, UltraTech entered into a deal with Burnpur Cement to acquire its 0.54 mtpa cement grinding assets, marking its entry into the state of Jharkhand.

Last month, the board of UltraTech approved the third phase of growth with an investment of ₹13,000 crores towards increasing the capacity by another 21.9 million tonnes per annum (mtpa) with a mix of brownfield and greenfield projects. The company aims to reach a capacity of 200 mtpa as part of its strategy to position itself as one of the largest cement companies in the world.

Post commissioning of the 3rd phase of expansion, UltraTech will be strongly placed across the country with 35.5 mtpa in South; 40.4 mtpa in East; 36.2 mtpa in North; 35.7 mtpa in Central and 33.8 mtpa in the West. This will be achieved by setting up 4 greenfield and 4 brownfield plants along with 4 greenfield bulk terminals, but there will be no investment in thermal power capacity, in line with its mission to reduce carbon emissions.

The expansion includes investments in setting up an additional 39-megawatt Waste Heat Recovery System (WHRS) capacity at a cost of ₹453 crore and ₹180 crore towards alternative fuel feeding and handling equipment contributing towards the company’s commitment to reduce carbon emissions. The company will use green energy over 60% by the end of 2027. This will be supported by a total WHRS capacity of over 400 megawatt and renewable energy of approximately 1.5 gigawatt.

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