Adani Cement Merge Boosts Ambuja Cements: What Investors Gain

Adani’s plan to bring its cement businesses together under Ambuja Cements could lift profits and create value for shareholders.

Background

Adani Group currently holds a majority stake in two cement companies: ACC (about 50%) and Orient Cement (about 73%). The group wants to simplify its structure by merging these businesses into a single entity, Ambuja Cements (ACEM).

Merger Details

• ACC shareholders will receive 328 shares of INR 2 each for every 100 shares of INR 10 they own. This exchange rate is almost equal to ACC’s current market price.
• Orient Cement shareholders will receive 33 shares of INR 2 each for every 100 shares of INR 10. This values Orient Cement at roughly a 9% premium to its closing price.
• No cash will change hands in these two swaps.
• Earlier, Adani announced plans to merge Sanghi Industries and Penna Cement into Ambuja. After approval, shareholders of Sanghi will get 12 ACEM shares of INR 2 for every 100 shares of INR 10, and Penna shareholders will receive a cash payment of INR 321.5 per share.

Valuation and Outlook

Analysts see the merger as a positive move. By combining operations, Ambuja Cements can achieve a larger scale, a better mix of production capacity, and higher profitability. The company is valued at about 20 times its projected September 2027 EV/EBITDA, leading to a target price of INR 750 per share. No discount is applied for the holding company’s stake in ACC and Orient.

Key Takeaways

• All‑share swaps simplify the group’s structure and avoid cash outflows.
• Orient Cement shareholders receive a modest premium.
• The combined entity aims for stronger earnings and growth.
• Target price of INR 750 suggests upside potential for current investors.

Remember, this is perspective, not a prediction. Do your own research and consider your risk tolerance before making any investment decisions.