Ultratech Announces Acquisition Of This Small Cap Company, Both Stocks Hit 52-Week Highs

Shares of Ultratech Cement and Kesoram Industries were upbeat on Friday morning, with the stocks going up to hit a new 52-week high.

What Happened: UltraTech Cement, the flagship company of the Aditya Birla Group, has finalised the acquisition of Kesoram Industries’ cement business in a share-swap deal, as reported in Thursday’s exchanges filing. The terms of the deal involve UltraTech issuing one share for every 52 shares of Kesoram, translating to an offer price of ₹173.15 per share, reflecting a 34% premium over Kesoram's last closing price of ₹139.40.

Valued at an estimated ₹7,600 crore, encompassing assumed debt from Kesoram, this strategic move aligns with UltraTech’s plans for expansion. The company had earlier announced a ₹13,000 crore third-round capital expenditure in October 2023, to elevate its capacity to 160 million tonnes (mt). The integration of Kesoram's business will contribute significantly to UltraTech’s target of achieving 200 mt capacity.

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The cement business of Kesoram, part of the B.K. Birla Group, comprises two integrated cement units in Sedam, Karnataka, and Basantnagar, Telangana, boasting a total capacity of 10.75 million tonnes per annum (mtpa). Additionally, Kesoram’s cement business includes a packing plant in Solapur, Maharashtra.

Post-acquisition, UltraTech’s annual cement capacity will reach 149.14 mt, including its overseas operations. The move is poised to enhance the company’s presence in the highly competitive and fast-growing western and southern markets in India. It also presents an opportunity to extend the company’s footprint in southern markets, such as Telangana, where the cement giant currently lacks a cement manufacturing plant.

The demerger process of Kesoram's cement business into UltraTech is anticipated to be completed within 9-12 months, subject to requisite approvals from shareholders, creditors, stock exchanges, and regulatory authorities.

Price Action: Kesoram Industries‘ share price was locked in 5% upper circuit at ₹146.35. Ultratech Cement’s share price was up 0.74% to trade at ₹9,070.50 as markets opened on Friday.

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