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Home / Markets / Stock Markets /  Adani Group's cement deal a 'master stroke'. Brokerages bullish on Ambuja Cements, ACC
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Shares of Ambuja Cements and ACC surged over 3% and 7%, respectively, in Monday's early deals on the BSE after conglomerate Adani Group said it would buy Holcim AG's controlling stake in the companies.

The Gautam Adani-led Adani Group has agreed to buy Swiss building materials maker Holcim Ltd’s India assets Ambuja Cements and ACC Ltd for $10.5 billion ( 80,000 crore). 

Adani Group plays a master stroke and agrees to buy Holcim’s entire stake in all its Indian operating entities. As the deal closes, as we see, ACC and Ambuja Cements becomes a direct, and most importantly, identifiable individual promoter-controlled entities and Adani emerges as the second largest player in Indian cement industry. As we read, this deal will potentially change the fortune of the sector for a betterment," said analysts at PhillipCapital.

The brokerage has revised its target price for ACC to 2,850 and has maintained Buy rating while it has upgraded Ambuja Cements shares' rating to Buy from Neutral with price target of 440.

"While Adani's strategy would be keenly watched, premium valuations could mean higher targeted unit profitability, likely banking on maintaining brand premium, saving from royalty reduction and synergies from other group adjacencies," said Jefferies in a note.

The Adani family, through an offshore special purpose vehicle, agreed to acquire 63.19% of Ambuja Cements and 54.53% of ACC. The deal is likely to close in second half of CY22.

“Given the premium valuation Adani group is paying for the acquisition, the required Ebitda/T is ~Rs2000 to achieve double-digit ROE. As a result fight for market share by reducing cement prices is less likely, in our view by the acquirer given the average Ebitda/t is ~Rs1000 for both the industry and Ambuja+ACC. We retain our moderately positive view on the cement sector," Jefferies added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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