UltraTech cement's acquisition of Birla Shakti sets new industry benchmarks
The cement business of Kesoram as on March 31, 2023 was Rs 3517.45 crore accounting for 99.54 per cent of its turnover
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Hyderabad: In a bid to solidify its foothold in the cement sector, UltraTech Cement has finalized an acquisition deal with Kesoram Industries. This move underscores Ultratech’s commitment to growth and market dominance.
In a strategic move poised to reshape the landscape of the cement industry, UltraTech Cement has finalized an all-stock deal to acquire the cement business of Kesoram Industries. This acquisition marks a significant milestone in UltraTech's pursuit of expanding its market presence and solidifying its position as a dominant force in the cement sector.
The transaction, valued at an estimated $750 million, positions UltraTech Cement to absorb Kesoram Industries' cement division, encompassing two integrated units at Sedam (Vasavdatta Cement, Karnataka) and Basantnagar (Kesoram Cement, Telangana) with a manufacturing capacity of 10.75 million tonnes a year. This move is anticipated to fortify UltraTech's production capacity and geographical reach, enabling the company to further bolster its market share. Earlier in 2018, UltraTech had acquired B K Birla’s Century Textiles’ cement business in a similar kind of deal.
Aditya Birla Group-owned UltraTech Cement, known for its innovation in the construction material domain, views this acquisition as a substantial step towards reinforcing its leadership in the industry. Industry analysts opine this move will enhance UltraTech’s geographic footprint into Telangana where it has had no manufacturing unit till date. The transaction will help UltraTech extend its reach in the 9 industrialised ( AP, Maharashtra, Karnataka, Goa, Kerala, MP, Telangana, Chattisgarh and TN) states of western and southern India where Kesoram has established a foothold over the years.
Kesoram Industries, a conglomerate with a longstanding legacy in the business landscape, has chosen to divest its cement business, brand name Birla Shakti Cement, in a bid to deleverage its stressed balance sheet including reducing the debt and outflow of interest. This move is aimed at optimizing resources and concentrating efforts on its core operations of rayon, transparent paper and chemical units while entrusting UltraTech Cement to nurture and further develop the cement division. The cement business of Kesoram as on March 31, 2023 was Rs 3517.45 crore accounting for 99.54 per cent of its turnover.
Commenting on the acquisition, Mr. Kumar Mangalam Birla, Chairman of Aditya Birla Group, expressed optimism about the synergies that this deal would generate. He highlighted the potential for leveraging operational efficiencies, optimizing costs, and leveraging technological advancements to deliver superior value to stakeholders.
The consolidation of Kesoram Industries' cement business into UltraTech's robust portfolio is anticipated to enhance shareholder value and contribute greatly to the company's financial performance. The transaction of acquisition after the approval of the shareholders and creditors and the regulatory authorities may take nine to twelve months for completion.
India is the second largest cement producer in the world and accounts for more than 8 per cent of the global installed capacity. On the back of rising rural housing demand, strong expansion of the industrial sector and the recent initiatives by the government such as the development of 98 smart cities has given a boost to the sector. The consumption of cement in India has been increasing rapidly as it is one of the cheapest products to buy in terms of Rs/kg. The cement industry in India is expected to grow 8 per cent in FY’24 and currently the installed cement capacity in India is 553 million tonnes per annum (MPTA) with a production of 298 MPTA.
