India's UltraTech buys stake in Star Cement as Adani rivalry continues (updated)

India Cements

27/12/2024 08:50

(Adds analyst comment in paragraph 5, 9 and share movement in
paragraphs 7, 8)
    By Hritam Mukherjee and Ashna Teresa Britto
       Dec 27 (Reuters) - UltraTech  ULTC.NS  India's top
cement maker will buy an 8.69% stake in Star Cement  STAT.NS ,
it said on Friday, in a deal worth up to 8.51 billion rupees
($100 million) for a company that rival Adani Group was
reportedly interested in acquiring.
    UltraTech said it would pay not more than 235 rupees per
Star Cement share, a 2% premium to the stock's closing price on
Thursday.
    Since billionaire Gautam Adani's ports-to-power conglomerate
entered the sector in 2022 to challenge Aditya Birla Group-owned
UltraTech's pole position, there has been a wave of deals as the
two jostle for market share amid expectations the government
will continue to spend heavily on infrastructure.
    Local media had previously reported that the Adani Group was
considering acquiring Star Cement, the biggest player in India's
northeast. Star has said it was not engaged in any such talks.
    "Now that UltraTech has made the first move on Star, there
is a little chance that Adani will pursue the deal," said
Ashutosh Murarka, an analyst with Choice Broking.
    Adani Group did not immediately respond to an email seeking
comment.
    Star Cement's shares initially jumped 7% to 247 rupees,
above the maximum offer price, which typically indicates
investors expect a higher bid or a rival offer. However, the
stock has since eased to trade around the offer price.
    UltraTech's shares were off 0.4%. Shares of Adani-group
controlled Ambuja Cements  ABUJ.NS  were flat, while those of
ACC  ACC.NS  were down 1%.
    UltraTech could consider acquiring a larger stake in Star
Cement to boost its northeast presence and hasten the pace of
meeting its capacity goals, said Murarka.
    Star Cement, like many small cement firms, has suffered from
the competition among the market leaders. Its annual sales
growth will likely slow to 6.8% this fiscal year, from 22% in
2023, brokerage Nirmal Bang estimated.
 
 ($1 = 85.3450 Indian rupees)

 (Reporting by Ashna Teresa Britto and Hritam Mukherjee in
Bengaluru; Editing by Savio D'Souza)
 ((AshnaTeresa.Britto@thomsonreuters.com))