UltraTech to acquire India Cements, intensifying market competition in southern India

UltraTech Cement Ltd, India's largest cement maker, has announced plans to acquire a majority stake in India Cements Ltd, signaling a major shift in the competitive landscape of Southern India’s cement market. The acquisition, pending regulatory clearances, is expected to escalate the ongoing battle for market dominance, particularly against UltraTech's main rival, Adani Cement.

The proposed acquisition follows UltraTech's initial purchase of a near-23 percent stake in India Cements from the promoter N. Srinivasan and his family. UltraTech's latest move will enhance its presence in the southern region, which has been a challenging market due to established regional players with strong dealership networks and brand loyalty. India Cements' significant capacity of 14.45 MTPA, predominantly in Tamil Nadu, aligns with UltraTech's strategic goals to bolster its southern footprint.

UltraTech, with an operational capacity of 149.5 MTPA in India and 154.9 MTPA globally, aims to reach 183.5 MTPA by FY27. The acquisition of India Cements will support this expansion, complementing UltraTech's existing integrated unit in Tamil Nadu, and addressing capacity constraints due to limestone scarcity.

This move comes shortly after Adani Cement’s acquisition of Penna Cement, indicating an intensified competition in the region. UltraTech is also in the process of merging Kesoram Industries’ cement operations, adding 10.75 MTPA, primarily in Southern India, and is rumored to be in discussions with Orient Cement.

Entities like Dalmia Bharat, Shree Cement, and JSW Cement are also gearing up for the anticipated market tussle, focusing on expansion in the south while also targeting other regions like the east and north.

Despite sluggish pricing, Southern India remains attractive for cement makers due to large-scale infrastructure and real estate developments. The acquisition is part of UltraTech's broader strategy to maintain leadership and capitalize on economic opportunities in the south.

India Cements, led by the aging N. Srinivasan, has been seeking to reduce its high debt and streamline operations. The company reported a net loss of Rs 227.34 crore for FY24, up from Rs 126.89 crore the previous year, and has been struggling with operational inefficiencies.

With UltraTech's acquisition of a 32.72 percent stake from the India Cements' promoters for Rs 3,954 crore, at Rs 390 per share, the company also plans an open offer for an additional 26 percent stake. This acquisition marks a significant step in UltraTech’s expansion strategy and is set to reshape the competitive dynamics in Southern India’s cement market.