UltraTech, a part of the Aditya Birla Group, is set to acquire Kesoram Industries' cement business in an all-stock deal valued at approximately Rs 7,600 crore, inclusive of debt. This acquisition will grant UltraTech control over two integrated cement plants in Karnataka and Telangana, boasting a combined production capacity of 10.75 million tonnes per annum (MTPA). According to UltraTech's statement, this move will allow the company to expand its presence in the rapidly growing western and southern markets of India, which are currently highly competitive and fragmented. Additionally, it presents an opportunity for UltraTech to penetrate the southern markets, specifically Telangana, where it presently lacks any cement manufacturing capabilities.
UltraTech, the nation's largest cement manufacturer, will issue one share of its own for every 52 shares of Kesoram Industries, as per a regulatory disclosure. This issuance will result in the creation of approximately 5.97 million new UltraTech equity shares allotted to Kesoram's shareholders. The exchange will lead to a 2.2% dilution of UltraTech's equity capital, valued at around Rs 5,400 crore. Alongside this, UltraTech will undertake the outstanding debt of Kesoram's cement arm, elevating the deal's enterprise value to approximately Rs 7,600 crore. Analysts from Centrum Broking estimate the swap ratio to be equivalent to Rs 173 per share for Kesoram, valuing the deal at $83 per metric tonne. This ratio marks a premium of 24% over Kesoram's closing share price of Rs 139.11.
"The valuation seems equitable for both entities, enhancing the efficiency and profitability of Kesoram's assets while granting UltraTech immediate access to operational assets,", remarked Mangesh Bhadang, Senior Vice President at Centrum Broking. Bansi S Mehta Valuers and PwC Business Consulting Services conducted valuations determining the swap ratio. The transaction, slated to conclude within the next 9-12 months, hinges upon regulatory clearances. Both companies, in their stock exchange filings, have affirmed that the transaction is executed on a fair basis. Furthermore, it was noted: "Several entities affiliated with the promoters of UltraTech are part of the promoter group of Kesoram Industries Ltd". Manjushree Khaitan, Chairperson of Kesoram Industries, is the paternal aunt of Kumar Mangalam Birla, Chairman of the Aditya Birla Group.