Shares of Ambuja Cements were gaining on Friday after the Adani Group firm announced a ₹10,442 crore acquisition of Penna Cement.

What Happened: Ambuja will acquire the stake from Penna Cement’s promoter group, P Pratap Reddy and family, funding the deal through internal accruals.

The move aligns with Adani’s ambitious goal of reaching 140 million tonnes per annum capacity by 2028 and capturing a 20% market share amid strong domestic demand. Adani has reportedly earmarked $3 billion (₹25,065 crore) to expand inorganically and become the biggest cement maker in the country.

Analyst reactions: Brokerage reactions were mostly positive around the acquisition and the outlook for the sector.

Jefferies has a “buy” rating with a target price of ₹735 per share on Ambuja, saying the acquisition will strengthen its position as a growing pan-India leader in the cement industry.

Jefferies highlighted that the growing market share of major players like Ambuja could squeeze smaller, less efficient competitors, potentially spurring more mergers and acquisitions in the sector.

Morgan Stanley views the acquisition as a positive development for the industry, projecting that Ambuja will expand its footprint in the southern market. It expects the acquisition to support medium-term volume growth for Ambuja, maintaining an “equal-weight” rating with a target price of ₹665 per share.

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Macquarie remained “neutral” on Ambuja with a target price of ₹608. It noted that the acquisition will boost Ambuja’s market share in South India to 10%-11%, up from 4%-5%. Although the deal’s cost of $90-100 per ton was higher than organic expansion costs, it is in line with recent industry acquisitions.

CLSA valued the deal at $103 per ton, close to the replacement cost of $90-110 per ton, and said it believes it will help Ambuja reach its 140 million ton capacity target by FY28. Still, CLSA issued a “sell” call on Ambuja with a target price of ₹575 per share, citing a lower impact on the demand-supply balance from inorganic expansion.

Citi has a “neutral” outlook on Ambuja with a target price of ₹675 per share, viewing the acquisition positively as a step towards delivering on growth plans.

Nuvama Institutional Equities sees potential for a turnaround similar to Ambuja’s Sanghi acquisition, enhancing Ambuja’s value. Nuvama retained a “buy” rating on Ambuja with a target price of ₹767, acknowledging its healthy capex plans and cost efficiency measures.

Price Action: Ambuja Cements’ share price was up 2.42% at ₹680.55 near the start of trade on Friday.

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