In this article, we will discuss the whole saga of Adani Group acquiring Ambuja and ACC Cement, why Adani Group acquired them, and then how the share price of both the stocks touched a high level and now are hitting a lower circuit in the past few days. So, let’s get started!
Ambuja-ACC Cement Acquisition:
- In the past 1 month until 21st September 2022, the stock of Ambuja Cements and ACC Limited was up by around 40% and 20% respectively.
- Adani Group has acquired both companies by acquiring the stake of Holcim which is the world’s largest cement player. Holcim owned around 63% stake in Ambuja Cements and around 4.4% stake in ACC Limited. Further, Amubja Cements holds a 50.05% stake in ACC Limited.
- Going back to the acquisition deal of Ambuja-ACC Cement, the acquisition was announced on 15th May 2022 when Lafarge Holcim declared the stake sale to Adani Group of both companies.
- Adani Group acquired a stake in both these companies for Rs. 37,000 crores and Holcim exited completely.
- This deal was fully executed and completed on 14th September in just 4 months. Post-acquisition 13 of the 15 board members have resigned. In Ambuja Cements 10 out of the 12 board members in ACC Limited has resigned. In both companies, new board members have been appointed.
- Gautam Adani and his son Karan Adani will be the non-executive director of the firm. Ajay Kapur will be both firms’ Chief Executive Officer (CEO).
Why Stock Price of Amubja Cements-ACC Limited rally?
- In an interview, Gautam Adani set the target of doubling the capacity of both firms altogether in the next 5 years, which is currently at 70 MTPA. Ultratech Cement is currently having the largest capacity of around 130 MTPA.
- Further, Adani Group also plans for significant margin expansion and aims to be the most profitable cement manufacturer in the country.
- Further, the company also remains open to further acquisitions and mergers.
- Adani Group has also committed to infusing Rs. 20,000 Cr. in these 2 companies. The company is planning to raise the fund via convertible warrants.
- Overall after considering the calculation of Holcim’s stake, open offer, and planned convertible warrants, Adani Group will own a stake of around 70% in Ambuja Cements and around 56.74% in ACC.
Why Ambuja Cements-ACC Limited Stock Hit Lower Circuit?
- Since Thursday 22nd September 2022, recently acquired companies of Adani Group- Ambuja Cements and ACC Limited continuously hit the lower circuit for two days in a row.
- The reason behind this fall in the stock price was the concern of investors over the pledging of Adani Group of its entire stake in ACC and Ambuja Cement worth around $12.5 billion or Rs. 96,800 Cr. to foreign banks to fund the acquisition deal with Holcim of $6.5 billion or around Rs. 50,375 Cr. The agreement of the pledging also stated that Adani Group will not be able to offload shares until the debt of the lenders gets cleared.
What Should Investors Do?
Adani Group is currently considered to be very aggressive on the expansion front and hence any company/sector that Adani Group is tapping into, the market is betting on the particular Adani Group’s counter. Due to the industry growth prospects along with aggressive plans, the market has consistently re-rated Adani Group stocks which were visible in Ambuja Cements and ACC stocks as well in the recent past. The cement sector is one of the important sectors under the infrastructure umbrella of the Indian Economy. Currently, the Indian economy is largely focused on infrastructural development; hence, cement stocks should be on the radar of investors. But, an investor should follow due diligence before making an investment decision.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.