InvestorQ : Is it correct that Ultratech is taking over the cement business of Emami? How do you see that impacting the price of Ultratech?
Khushi Patel made post

Is it correct that Ultratech is taking over the cement business of Emami? How do you see that impacting the price of Ultratech?

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Anjana Aiyar answered.
2 years ago
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While the deal is not yet through yet, market sources are indicating that UltraTech Cement of the Birla group has emerged as the front-runner to buy the cement business of Emami Group. It will be an all-cash deal and the payout could be close to Rs.7,000 crore. Ambuja Cements is also a contender for the cement business of Emami. This deal will enable UltraTech make deeper inroads into eastern India. Ultratech is already the largest cement manufacturer in India and this will consolidate their position further.

Emami Cement is part of the Emami group of Kolkata and has a total capacity of around 8 million tonnes per annum (mtpa) across three operational cement plants in eastern and central India, while UltraTech has a capacity of over 117 mtpa. If Ultratech gets the deal in its favour, then it ends up with total capacity of above 125 mtpa. The price of Rs.7000 crore sums up to $105 per ton plus a 10% premium for monopoly capacity in the Eastern region.

Ultratech, if it gets the Emami capacity, will add one more feather to its inorganic cap. Earlier it has purchased the cement unit of Century, Binani Cements and Jaypee Cements in the last couple of years. For Emami, this will be an opportunity to monetize part of their assets and reduce their debt burden.

It should be positive for Ultratech overall due to consolidation but the real boost to cement companies is visible only when the pricing power comes to the producers. That may still be time away.

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