Will Cement Giant Stage a $2 Billion Power Grab? Indian Takeover Battle Heats Up!

UltraTech Cement, India’s biggest cement maker, bought a 23% stake in rival India Cements. This could be a strategic move to gain influence or even control India Cements. The close race between their stakeholdings and industry consolidation trends suggest a potential fight for control of India Cements.

CONTENTS: Will Cement Giant Stage a $2 Billion Power Grab?

• Cement giant eyes takeover
• Cement war heats up
• Blocking rival’s cement play
• Cement turf war brewing
• Cement takeover watch

UltraTech Cement’s announcement to acquire a 23 percent stake in India Cements has ignited discussions about a potential hostile takeover. This acquisition will place UltraTech, India’s largest cement manufacturer led by Kumar Mangalam Birla, in a strategic position within India Cements.

The South India-based cement company, long associated with its owner N Srinivasan, currently has Srinivasan and other promoter group members holding only a 28.42 percent stake.

UltraTech’s move appears to be a calculated effort to consolidate its market dominance. Meanwhile, India Cements, with its historical significance and robust market presence, represents a valuable asset for any portfolio.

N Srinivasan, a prominent figure in the Indian cement industry and the vice-chairman and managing director of India Cements, now faces a precarious situation. With less than a 29 percent stake, his control over the company is vulnerable. The narrow difference between UltraTech’s newly acquired 23 percent stake and Srinivasan’s stake raises the possibility of a power struggle.

UltraTech’s plan to acquire a significant stake in India Cements coincides with a period of rapid expansion by its biggest rival in the cement industry, the Adani group. Recently, Adani announced its acquisition of Penna Cements for over Rs 10,000 crore, adding 10 million tonnes per annum (mtpa) capacity to its portfolio. Last year, Adani also secured a controlling stake in Sanghi Cements.

India Cements boasts a capacity of over 15.5 mtpa. The Aditya Birla group became the largest cement manufacturer in the country in 2004 when it acquired UltraTech from L&T.

Analysts suggest that while UltraTech described its purchase of a major stake in India Cements as a financial investment in its stock exchange filing, the underlying motive might be to prevent other corporate rivals from acquiring India Cements.

Large conglomerates like the Adani group and JSW group are pursuing inorganic growth opportunities in the sector, where demand is projected to rise due to increasing infrastructure spending by the Indian government and a revival in private sector capital expenditure.

UltraTech did not reveal the names of the India Cements shareholders from whom it plans to buy the stake. However, public shareholding in India Cements is primarily held by three major investors: Dmart founder Radhakishan Damani with a 20.78 percent stake, ELM Park Fund Ltd with a 5.58 percent stake, and LIC with a 3.6 percent stake. On Thursday, June 27, up to 20 percent equity stake in India Cements was sold through the block deal window.

A hostile takeover happens when an acquiring company seeks control of a target company against the wishes of its management. The close stakes between UltraTech and N Srinivasan suggest that UltraTech might consider this approach. If UltraTech decides to increase its stake further, it could challenge Srinivasan’s control and push for changes in the management and strategic direction of India Cements.

Although acquiring a 23 percent stake does not mandate a 26 percent open offer from public shareholders—since the purchase is below the 25 percent threshold needed to exercise control under SEBI regulations—UltraTech could still announce an open offer to acquire additional shares from public shareholders if it aims to take control of the company.

This move should be viewed within the broader context of the Indian cement industry, which has experienced consolidation in recent years. Major players have been enhancing their capacities and market share through acquisitions. UltraTech’s recent action can be seen as part of this larger trend, positioning itself more favorably in an increasingly competitive market.

The upcoming months will be pivotal in assessing whether this acquisition could escalate into a hostile takeover. Stakeholders and market analysts will closely monitor developments as both companies manage this intricate scenario. Currently, the potential for a hostile takeover at India Cements is speculative, yet given the interests and participants, it remains a plausible outcome.

As of now, inquiries directed to UltraTech Cement, India Cements, and Radhakishan Damani have not yielded responses as of the time of publication.