UltraTech to acquire Kesoram Industries cement business; shares scale fresh peaks

UltraTech Cement share price NSE, Kesoram Ultratech news: UltraTech Cement shares clocked a fresh all-time high on Friday, December 1, continuing to rise for a second straight day, after the board of the Aditya Birla group company approved the acquisition of the cement business of Kesoram Industries in an all-stock deal valued at Rs 5,379 crore.

Kesoram Industries shares also zoomed to touch a 52-week high. UltraTech Cement shares gained nearly two per cent to a record Rs 9,152 apiece, surpassing an earlier peak of Rs 9,021.4 touched the previous day, and the stock of Kesoram Industries rose nearly five per cent to Rs 146.05 apiece, surpassing an earlier 52-week high of Rs 139.1  scaled on Thursday. 

As part of the deal, UltraTech will issue one share for every 52 shares of Kesoram Industries, and give UltraTech ownership of two integrated cement units in Karnataka and Telangana. Analysts say the development is likely to strengthen UltraTech’s position in the southern regions of the country. Earlier, Kesoram Industries' board approved the withdrawal of the scheme of demerger with its wholly-owned subsidiary, Cygnet Industries Ltd, and approached UltraTech Cement. 

UltraTech Cement share price target: Here's what brokerages suggest

CLSA has retained an outperform rating on UltraTech Cement with a target of Rs 9,450. Post the UltraTech has entered into an agreement to acquire the cement business of Kesoram Industries through a share swap (1:52), on our calculations, this implies an EV of Rs75bn, the brokerage in its note said.  

"This acquisition, along with ongoing organic expansion, would take UltraTech’s total capacity to 192mt in the next four years, bringing it another step closer to its stated goal of 200mt capacity by FY28," the brokerage added. As a result, CLSA believes it will continue to grow faster than the industry over the medium term. 

Morgan Stanley has maintain an overweight rating. The brokerage has placed the target at Rs 9300. Mentioning the acquistion as being incrementally positive for industry, the brokerage said, " It is also positive for UTCEM given its increased footprint in the south & should help drive economies of scale.

Moreover, Jefferies and Citi have each maintained a 'buy' call on the counter with a target price of Rs 9,700 and Rs 9,900 respectively.

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