Media experiences (supply: www. cnbctv18.com) indicating the ACC-Ambuja merger have resurfaced. We consider this was speculated earlier as properly and thus it’s not completely new or unsubstantiated. This is enabled by latest MMDR amendments which take away switch costs within the switch of mining leases, as within the case of M&A transactions. ACC and Ambuja have already got an MSA in place to discover synergies in distribution and procurement prices. Both corporations have capability enlargement plans so as to add 11.8 mtpa aside from latest additions, e.g. at Mundwa.
Consolidation of Holcim’s curiosity right into a single entity would allow higher planning for: (1) incremental capability additions, notably brownfield, leveraging group-level sources; (2) optimised logistics for uncooked supplies, clinker, and cement; (3) higher use of money, notably at ACC; (4) enhancing liquidity and float in Ambuja; and (5) conveying the message of a progressive, strategic-thinking organisation.
Stay Outperform on Ambuja (TP Rs 410) on sturdy long-term demand outlook, pricing self-discipline, with commodities pullback driving profitability and enticing valuations.
Current enlargement plans so as to add 11.8mtpa throughout ACC and Ambuja: Both ACC and Ambuja have development pipelines throughout areas, taking their mixed share of the East within the portfolio to 34% (26mtpa) from 26% (17mtpa) at the moment. Ambuja’s board has authorised an funding of `35 bn for 7.0mtpa enlargement throughout current grinding models at Sankrail and Farakka, a greenfield grinding unit at Barh, Bihar, and a 3.2mtpa brownfield clinker enlargement on the built-in plant in Bhatapara, Chhattisgarh.
ACC has ongoing enlargement tasks at: (1) Tikaria, Uttar Pradesh (brownfield, cement 1.6mtpa, to be accomplished in 1Q22); (2) Ametha Integrated Project, Madhya Pradesh (greenfield, clinker 2.7mtpa and cement 1.0mtpa, to be accomplished in 2Q22); and (3) Salai Banwa Grinding Unit (greenfield, cement 2.2mtpa).
Holcim’s holdings consolidation right into a single entity for higher planning: The consolidation of Holcim’s curiosity right into a single entity would allow higher planning for: (1) incremental capability additions, together with in ACC similar to brownfield developments, and limestone reserves; (2) optimised transport and dispatch of uncooked supplies, clinker, and cement; (3) higher use of money at ACC; (4) enhancing liquidity and float in Ambuja; and (5) conveying the message of a progressive, strategic-thinking organisation vs that of a staid, no-growth firm of the previous a number of years.
Source: www.financialexpress.com”