The cement sector space has been buzzing with mergers and acquisitions for some time now and there are no signs of slowing down.
The cement sector space has been buzzing with mergers and acquisitions for some time now and there are no signs of slowing down.
NDTV Profit's last analysis in July 2024 on the potential merger-and-acquisition candidates in the cement space pinpointed a cluster of potential M&A contenders, including companies like India Cements Ltd., Sagar Cements Ltd., Orient Cement Ltd., HeidelbergCement India Ltd. and more.
Since then, UltraTech Cement Ltd. took over India Cements and also gained an 8.69% stake in Star Cement Ltd., while Ambuja Cements acquired Orient Cement Ltd.
Even Orient Cement gained over 7% after Adani Group announced the company's acquisition.
Who Can Be Next?
Analysts says one can look at three main parameters while trying to figure out the next M&A target in the space:
Companies with capacities less than 20 million tonnes per annum. Players with 3–10 MTPA are more likely to be acquired, according to ICRA Research.
Companies that have an enterprise value per tonne below $110–120 per MT, which is the average cost of setting up an integrated cement plant from scratch.
Based on the above mentioned parameters, seven listed cement companies get filtered out.
From the above list, there have been media reports about how Aditya Birla Group's UltraTech Cement Ltd. is in talks to acquire HeidelbergCement, while Mangalam Cement is already a company of BK Birla Group.
There have also been media reports of Shree Digvijay Cement Co.'s promoter, True North, looking for a complete exit from its 54.83% stake in the entity since last year.
Who's More Likely To Get Acquired?
HeidelbergCement, Mangalam Cement, Shree Digvijay and Saurashtra Cement are high-probability targets. These companies are facing succession-related issues and have strong backend facilities, according to DAM Capital's note dated March 16.
DAM said professional management could sell their stake if exit valuations are lucrative.
HeidelbergCement, Deccan Cements and Saurashtra Cement are more likely to get acquired, another analyst said on the condition of anonymity.
CareEdge Ratings said the southern market of India still offers a larger base to get consolidated as it still stands the most fragmented market when compared to other regions. This is a trend that was seen in 2024 where five out of the six M&A deals of financial investments were made in companies with higher presence in the south of India.
Based on this view on trend, out of the seven identified potential M&A candidates:
100% of NCL Industries and Deccan Cements' FY24 capacity was based in South.
77% of Sagar Cement's FY24 capacity was based in the South, 13.8% in the east and 9.2% in the central region of India.
91.9% of HeidelbergCement's FY24 capacity was based in the central region, while the balance was in the south.
100% of Shree Digvijay and Saurashtra Cement's FY24 capacity was based in the west.
All of Mangalam Cement's FY24 capacity was based in the north.
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