InvestorQ : What could be the factors that may determine who Ambuja Cements will be sold to?
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What could be the factors that may determine who Ambuja Cements will be sold to?

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Riya Dwivedi answered.
2 months ago
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As of now, it is hard to say who wins the bid for Ambuja Cement. In the case of JSW and Adani, the buyout of stake in Ambuja would be a case of lateral expansion of their infrastructure forays over the last few years. The deal needs deep pockets and both the groups have deep pockets to boot. Whosoever gets the deal becomes the second largest cement player. Of course, if Shree wins the bid, they are almost as large as Ultratech.

Will Ultratech be able to win the bid for Ambuja Cement? It could create an issue with CCI. For instance, in the case of Ultratech, the deal will mean total domination. Look at the numbers. Ultratech already has 124 MTPA cement capacity out of the total capacity of 381 MTPA available in India. Adding the 65 MTPA capacity of Ambuja and of ACC will give Ultratech 50% of cement capacity in India and the CCI is unlikely to welcome that idea.

But the bigger insight from the deal is the cement is starting a major consolidation. Not only is cement polluting, but it is also power, water and freight intensive. As the green outlays for cement increases, it would become unviable for smaller plants to sustain. It may be a better idea for them to sell out leaving just 8-10 large players. The Ambuja deal may be the start of this trend and the M&A action will finally shift to the large cap names in cement.

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