InvestorQ : Why have the shares of Ambuja Cements rallied so sharply in recent weeks?
swati Bakhda made post

Why have the shares of Ambuja Cements rallied so sharply in recent weeks?

Sam Eswaran answered.
1 month ago

Ambuja Cements on Friday touched a 9-month high price of Rs425.25. It is very closer to its 52-week high price of Rs443. The spurt in the stock price came after the Competition Commission of India (CCI) approved the proposed acquisition of Ambuja Cements and ACC by Adani group. The Adani group had bought the stake from Holcim and will soon commence its open offer to residual shareholders. It is not just Ambuja cements, but even ACC, which is currently owned by Ambuja Cements, traded higher on Friday.

The acquisition of the stake will be done by a special purpose vehicle (Endeavour Trade and Investment) set up by the Adani family in the tax haven of Mauritius. The original deal is worth $10.5 billion or approximately Rs81,350 crore. The combined entity now becomes the second largest cement company by manufacturing capacity after Ultratech. In the last six months since the deal was announced, the stock of Ambuja Cements is up 23% while the stock of ACC is up 7%. Both the stock have comfortably outperformed the Nifty.

Adani is betting on India’s per capita cement consumption converging closer to global averages, which would entail cement demand more than doubling from current levels. This cement demand will be driven by rapid urbanization, growing middle class and a big thrust to affordable housing. Of course, the real advantage will be the synergy benefits since the relationship gives them the added benefits of easy access to raw material, renewable power and logistics, apart from captive ports to move the cement around.