Shares of India Cements fell over 3% in early trade on Friday, taking some breather after strong rally in the past two sessions, a day after UltraTech Cement acquired about 24% equity stake in the company. In the past two sessions, the Chennai-based cement stock has risen nearly 28%, driven by strong volume.
As per the exchange data, ace investor Radhakishan Damani, the founder of the hugely popular DMart chain of hypermarkets, and related entities sold around 6.91 crore shares, or about 24% stake, in India Cements to Ultratech Cement through block deals on June 27, 2024. The shares were sold at an average price of 277 apiece, amounting to ₹1,914 crore.
Snapping two sessions gaining streak, India Cements shares opened lower at ₹291.60 today, after ending 11.5% higher at ₹293.15 on the BSE yesterday. In the early trade so far, the cement stock declined as much as 3.2% to ₹283.5, while the market capitalisation slipped to ₹9,040 crore.
The share price of India Cements touched its 52-week high of ₹299 in the previous session, rebounding 73% from its 52-week low of ₹172.55 hit on June 4, 2024. The cement stock has risen 38% in the last one year, while it gained 15% in six months and 40% in just one month.
As per the exchange data, N Srinivasan (managing director and CEO)-led promoter entity hold 28.42% stake in the company, out of which 46.2% shares are pledged, as per Trendlyne data.
In an exchange filing yesterday, UltraTech Cement, the country’s largest cement manufacturer, announced to buy a 23% stake in India Cements for a total consideration of ₹1,885 crore. The timeline for completion of this deal was one month, but the acquisition was completed in a single day. As of now, there is no indication of acquisition for controlling stake in ICL.
Formed in 1946, India Cements is one of the leading cement manufacturers in South India with established presence in all five states in the region. It manufactures cement (Ordinary Portland Cement and Portland Pozzolana Cement in 37:67 mix) under the Coromandel, Sankar and Raasi brands.
Tushar Chaudhari, Research Analyst, Prabhudas Lilladher, says that the deal can be mutually beneficial for both companies as UltraTech can work of strategic cement supply agreement to gain market share in undersupplied AP and Telangana belt and ICL’s financial performance can also improve as volume improves.
India Cements has 14.5 million tonnes per annum (MTPA) cement capacity (5 mtpa in Telangana, 6 mtpa in Tamil Nadu, 2.1 mtpa in AP, and 1.5 mtpa in Rajasthan) along with 11.13 mtpa clinker capacity; which complements well with UltraTech’s Southern capacities if it will be able to crack a deal with ICL promoters in future. UltraTech has 2 mtpa in Telangana, 5 mtpa in Tamil Nadu, 10.6 mtpa in AP.
“We believe consolidation is expected to continue in the cement space with industry leaders having strong balance sheets; competition is also expected to increase with players trying to gain market share. Near term demand remains muted and expected to improve post monsoon,” says analyst at Prabhudas Lilladher.
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