Jefferies Positive On Buy-Rated Ambuja Cements After Penna Cement Deal

Jefferies says acquisition of Hyderabad-based cement maker moves Ambuja, a part of Adani Group, to top three players in the south region
Jefferies Positive On Buy-Rated Ambuja Cements After Penna Cement Deal
Source: Ambuja Cements

Global brokerage Jefferies maintained positive stance on Ambuja Cements Ltd. following its move to acquire Penna Cement Industries Ltd. (PCIL) to boost its market presence.

The acquisition of Hyderabad-based PCIL moves Ambuja, a part of Adani Group, to top three players in the south region and reinforces its strong positioning as a growing pan-India leader, Jefferies said in an investor note.

Ambuja yesterday agreed to acquire Hyderabad-based PCIL from its existing promoter group, P. Pratap Reddy and family, at an enterprise value of 10,422 crore rupees ($1.25 billion) with an aim to boost its market presence.

Jefferies rates Ambuja as Buy with a target price of 735 rupees per share. The stock closed at 664.50 rupees on the National Stock Exchange yesterday.

The brokerage said the acquisition in the south will double Ambuja's (+ACC) presence from current 9-10 million tons per annum (MTPA) to around 20 MTPA, amounting to 10% of the industry capacity in the south and moving it to the top three players in the market, alongside UltraTech Cement Ltd. and Ramco Cements Ltd.

Jefferies said Ambuja’s consolidated net cash position stood at 243 billion rupees as of April 2024, including the warrant money from the promoter, giving them a strong war chest for organic/inorganic expansions.

“We reiterate that increasing market share of major players is likely to squeeze smaller inefficient players further, driving more M&A in the sector” it noted.

Note: $1 = 83.5317 Indian rupees

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