Explained: Why India Cements share price jumped 11% today

Shares of India Cements Ltd jumped 11 per cent on Monday after it was announced that UltraTech Cement had been approved by the Competition Commission of India (CCI) to acquire a majority stake in the company.

UltraTech Cement plans to acquire 10,13,91,231 shares of India Cements, each valued at Rs 10. This represents a 32.72% stake in the company, held by its promoters, members of the promoter group and one other shareholder.

In addition to the stake purchase, UltraTech Cement will make an open offer to acquire up to 8,05,73,273 shares from public shareholders. This open offer, which represents 26% of the capital of India Cements, is priced at Rs 390 per share. The offer price represents a 15% premium to India Cements’ closing price of Rs 339 on Friday.

THE the news sparked a rally in India Cements shareswhich climbed 11% to Rs 376.30 during Monday’s trade on the Bombay Stock Exchange (BSE). UltraTech Cement also registered a modest gain of 1.14%, with its shares trading at Rs 11,555 during the day.

At the time of writing, India Cements shares were trading at Rs 368.50, up 8.65%.

The acquisition deal was first announced on July 28, 2024, with UltraTech Cement revealing plans to invest Rs 3,950 crore to acquire a significant stake in India Cements. UltraTech Cement had earlier acquired a 23% stake in India Cements at Rs 268 per share.

Market experts view the acquisition as a move that could lead to better price discipline in the cement industry. Industry consolidation is expected to improve long-term profitability and return ratios.

For UltraTech Cement, this acquisition is part of its growth strategy. The company aims to achieve a global production capacity of 200 million tonnes per annum (mtpa) by fiscal 2027. UltraTech Cement management has reiterated its target of double-digit volume growth for the second half of fiscal year 2025.

This growth is expected to be driven by government spending on infrastructure projects, continued demand for urban housing and increased rural demand after good monsoons. Analysts also highlighted UltraTech’s continued focus on improving efficiency, which supports its expansion plans.

UltraTech Cement’s acquisition of India Cements, as well as its planned acquisition of Kesoram, is expected to be completed by the end of the 2025 financial year.