Ambuja Cement has announced a strategic merger with Sanghi Industries Limited (SIL) and Penna Cement Industries, marking a transformative step in the Indian cement industry. This move consolidates operations, strengthens Ambuja’s market position, and sets the stage for continued growth and leadership in the sector. The merger is expected to streamline governance, improve efficiency, and enhance the company’s competitive edge in the rapidly evolving cement market.
Strengthening Ambuja Cements industry leadership
Through this merger, Ambuja Cement will expand its reach and production capacity, further solidifying its status as a market leader. The transaction includes the integration of Sanghi Industries into Ambuja, with shareholders of Sanghi Industries receiving 12 shares of Ambuja Cement for every 100 shares of SIL. This change offers shareholders the opportunity to move from a small-cap, less liquid company to a large-cap industry leader.
According to Investec Bank plc (UK), this consolidation will result in the issuance of 13 million new shares of Ambuja Cement, creating a minimal dilution of the promoter’s stake by just 0.35%. This move ensures that while there is a slight equity dilution, the overall impact remains minimal, while unlocking significant value for shareholders and paving the way for further growth.
Penna cement acquisition to boost coastal market presence
Additionally, Ambuja Cement has acquired Penna Cement, one of India’s leading cement manufacturers, for a cash enterprise value of ₹104.2 billion. This acquisition will significantly enhance Ambuja’s market presence in coastal areas, strengthening its production capacity and enabling the company to better serve diverse markets across India.
Streamlining operations and improving compliance
As part of the merger, Ambuja will also consolidate its stake in Adani Cementation. The company will issue 174 shares of Ambuja for every 1 share of Adani Cementation, simplifying its organizational structure and reducing complexities related to related-party transactions (RPTs). This move will lead to the issuance of 8.7 million shares and result in a 0.24% dilution of the promoter stake.
Focus on sustainability and synergy
The management has emphasized the strategic focus on growth, cost efficiencies, and synergy, ensuring that the merger creates long-term value while adhering to sustainability and Environmental, Social, and Governance (ESG) principles. As these transactions move forward, Ambuja Cement remains committed to innovation and sustainability within the sector.
Regulatory approvals and expected completion
The merger is subject to regulatory approvals, including clearances from stakeholders and statutory authorities. The process is expected to be completed within the next 9-12 months, with the equity dilution for Ambuja Cement shareholders estimated at just 0.88%. Once completed, the merger will allow Ambuja to further consolidate its position as an industry leader while enhancing its operational footprint.
