UltraTech Cement, India’s largest cement producer, announced on Friday that it will purchase an 8.69% stake in Star Cement for up to ₹851 crore ($100 million). The deal comes after the Adani Group had been reported to show interest in acquiring Star Cement, a major player in India’s northeastern cement market.
UltraTech plans to acquire the stake at a price not exceeding 235 rupees per share, a 2% premium over the stock’s closing price on Thursday.
Strategic Move in the Cement Industry
This acquisition highlights the ongoing competition in India’s cement sector between UltraTech and the Adani Group. The two giants have been battling for market share, particularly as the Indian government continues to heavily invest in infrastructure development. UltraTech’s purchase of the stake in Star Cement signals a shift, with Adani Group possibly stepping back from its previously rumored bid to acquire the company.
Analysts suggest that with UltraTech making the first move, it is unlikely that Adani will proceed with the acquisition. According to Ashutosh Murarka, an analyst at Choice Broking, UltraTech could consider increasing its stake in Star Cement to strengthen its presence in the northeast and expedite its capacity expansion.
Market Response
Following the announcement, Star Cement’s stock surged 7% to 247 rupees, exceeding the maximum offer price, indicating that investors may expect a higher bid or a potential rival offer. However, the stock later settled back around the offer price.
In contrast, UltraTech’s shares dropped 0.4%, while shares of Ambuja Cements, controlled by the Adani Group, remained flat. The stock of ACC fell 1%.
Star Cement’s Performance
Despite being a leading player in northeastern India, Star Cement faces strong competition from industry leaders. According to brokerage Nirmal Bang, Star’s sales growth is expected to slow significantly to 6.8% in the current fiscal year, compared to 22% in 2023.
This strategic investment by UltraTech reflects its ambitions to expand its footprint and strengthen its competitive edge in the Indian cement market.
