Birla's UltraTech buys stake in India Cements to compete with Adani Group, especially in South India

UltraTech buys an India Cement stake as cement makers may benefit from PM Narendra Modi's third term, with infrastructure spending expected to increase.

Kumar Mangalam Birla’s UltraTech Cement is acquiring a 23% stake in Chennai-based India Cements to counter the Adani Group’s buying spree, as the battle to dominate India’s cement sector, particularly in South India, intensifies.

A man cleans an Expert Testing Van of UltraTech Cement outside a cement store in Ahmedabad. (Amit Dave/Reuters)

How much will UltraTech pay for the deal?

UltraTech Cement, India's largest cement maker, will pay ₹267 a share to purchase 7.06 crore shares of India Cements, adding up to a ₹1,885 crore deal.

The purchase will make the Aditya Birla Group, the second largest shareholder in India Cements, with the founders of India Cement owning 28.5% currently. UltraTech however, has told that it is a non-controlling investment, Bloomberg wrote.

Why is UltraTech buying India Cement?

The deal comes as cement manufacturers are poised to benefit from Prime Minister Narendra Modi's third term, which is expected to increase infrastructure spending in India, which happens to be the world's second largest producer of cement, according to a Reuters report.

The deal also comes after the Adani group's Ambuja Cements announced the acquisition of Hyderabad-based Penna Cement Industries for $1.2 billion earlier this month. The Adani group became India’s second largest cement maker in 2022, after buying Ambuja and ACC, as well as some other smaller firms.

India Cements being based in Chennai helps UltraTech retain a strong presence in South India, as the Adani group attempted to strengthen their hold in the region with the purchase of Penna Cement.

UltraTech had previously purchased Kesoram Industries' cement business for ₹5,379 crore, increasing its market share in South India to 11%.

The deal will help increase its market share in the region by 8%, it had said. An industry estimate put its share at 6% as of March 2024.

Birla vs Adani

UltraTech has an annual capacity of 152.7 million tonnes, while the Adani group's cement division has a capacity of 89 million tonnes. Ultratech is targeting 200 million tonnes by March 2027 and the Adani group is targeting 140 million tonnes by 2028, Bloomberg wrote.

Shares of UltraTech jumped as much as 7% to a record on Thursday after the announcement, while India Cements shares surged almost 14%.