Media reviews (supply: www. cnbctv18.com) indicating the ACC-Ambuja merger have resurfaced. We imagine this was speculated earlier as effectively and thus it’s not completely new or unsubstantiated. That is enabled by current MMDR amendments which take away switch fees 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. Each firms have capability growth plans so as to add 11.8 mtpa other than current 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 assets; (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.
Keep Outperform on Ambuja (TP Rs 410) on sturdy long-term demand outlook, pricing self-discipline, with commodities pullback driving profitability and engaging valuations.
Present growth plans so as to add 11.8mtpa throughout ACC and Ambuja: Each ACC and Ambuja have development pipelines throughout areas, taking their mixed share of the East within the portfolio to 34% (26mtpa) from 26% (17mtpa) presently. Ambuja’s board has accepted an funding of `35 bn for 7.0mtpa growth throughout current grinding models at Sankrail and Farakka, a greenfield grinding unit at Barh, Bihar, and a 3.2mtpa brownfield clinker growth on the built-in plant in Bhatapara, Chhattisgarh.
ACC has ongoing growth tasks at: (1) Tikaria, Uttar Pradesh (brownfield, cement 1.6mtpa, to be accomplished in 1Q22); (2) Ametha Built-in Mission, 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 reminiscent of 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.