What Analysts Made Of Ambuja Cements' Acquisition Of Sanghi Industries

Ambuja Cements Ltd.'s acquisition of Sanghi Industries Ltd. is seen as an excellent move to increase production and capture market share, according to analysts.

Adani Group-owned cement maker bought the Gujarat-based company in an all-cash deal, valuing it at an enterprise value of Rs 5,000 crore.

Ambuja Cements will acquire 14.66 crore shares of Sanghi Industries, representing 56.74% of the overall shareholding, from Chairman and Managing Director Ravi Sanghi, members of the Sanghi family and other promoter entities, according to an exchange filing.

Here's what analysts have to say about the acquisition:

Managing Partner, Rakesh Arora 

The acquisition is excellent and at a very attractive valuation, according to Rakesh Arora of GoIndiaStocks.com. 

"I think the fair value would have been more like Rs 6,000 crore plus," he said.

Ambuja Cements has undoubtedly secured an exceptional and advantageous deal. This acquisition furnishes them with a robust foundation to significantly accelerate their capacity expansion efforts, Arora said.

The existing infrastructure is already in place, with notably higher clinker capacity compared to cement capacity, which facilitates a streamlined integration of grinding units, he said. "So within a year, I think they can go to nine million tonne and overall, it's a very positive deal."

Seizing the opportunity to harness the entire 6,000 kilometre coastline of India through the combined potential of Ambujanagar and Sanghi should be the key focus for the Adani Group moving forward, Arora said.

Residual Stake Of Promoters At Sanghi Industries

As for the residual stake of the promoters in Sanghi, the price being paid is not that lucrative, according to Arora. "While there will be an open offer for all, I doubt retail investors are under the same kind of duress as Sanghi promoters were," he said.

The Adani Group might not be able to attract significant participation in the open offer, and the overall game plan for the group would be to merge ACC Ltd. and Saangi Industries into Ambuja at some point in time, according to Arora.

Senior Research Analyst, Uttam Kumar Srimal

This acquisition at Rs 5,000 crore in enterprise value is correct as it will help Ambuja Cements expedite its expansion plan and catch up with larger companies such as UltraTech Cement Ltd,  according to Uttam Kumar Srimal, senior research analyst at Axis Securities.

The acquisition will enable the company to strengthen its geographical presence, particularly in Gujarat and its neighbouring regions, such as Mumbai and other interconnected areas, Srimal said. This move is expected to play a crucial role in its efforts to solidify and enhance its market position in the future.

Research Analyst, Navin Sahadeo

Terming the acquisition as lucrative, Navin Sahadeo, a research analyst at ICICI Securities, said that the deal will certainly contribute significantly to boosting the company's market share.

Ambuja Cements' adept blending ratio allows them to potentially achieve an output of around 10 million tonne, Sahadeo said. Sanghi Industries had previously considered a two-million tonne expansion of a grinding unit in Surat, he said. These factors collectively signify substantial capacity addition potential resulting from the acquisition, he said.

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