Shares of rose on Tuesday after the company announced a key merger development involving group entities ACC and Orient Cement, a move seen as part of the Group’s strategy to simplify its cement business structure.
The stock gained over 4 per cent in early deals, and closed at ₹546.75 on the , after touching a high of ₹563.25, compared with the previous close of ₹540.
Investor sentiment was buoyed after Ambuja Cements said it will issue 328 shares for every 100 shares held in ACC as part of the approved merger swap. Separately, the board of Orient Cement also cleared a scheme of amalgamation with Ambuja Cements. Under this arrangement, shareholders of Orient Cement will receive 33 shares of Ambuja Cements for every 100 shares held. Orient Cement is currently a subsidiary of Ambuja.
According to the disclosure, the transactions are expected to be completed over next one year.
JM Financial & Motilal assign buy ratings
Brokerage JM Financial said the boards’ approval to merge ACC and Orient Cement into Ambuja Cements aligns with the group’s long-term vision of creating a unified “One Cement Platform” and building a pan-India cement powerhouse. It noted that the swap ratio for ACC is largely at parity with its closing market price, while minority shareholders of Orient Cement are offered a premium of around 9 per cent.
JM Financial added that post-merger, both Ambuja and ACC brands will continue to operate independently, retaining their product portfolios and market positioning. While the transaction is seen as broadly neutral to Ambuja’s target price due to the absence of incremental merger synergies, the brokerage believes the simplification of the group structure and elimination of material related-party arrangements should improve transparency and governance, which is sentimentally positive for the stock.
JM Financial maintained its buy rating on Ambuja Cements with a target price of ₹700 per share.
Motilal Oswal also viewed the development positively, highlighting Ambuja Cements’ steady improvement in profitability. The brokerage pointed out that the company has delivered an EBITDA per tonne increase of about ₹1,000 for the third consecutive quarter, driven by stable realisations and a sequential reduction in operating costs. It said the integration of acquired assets, including Orient Cement, Penna and Sanghi brands, has been encouraging so far.
Motilal Oswal noted that Ambuja’s net cash position has declined due to aggressive organic and inorganic expansion plans, along with investments in green power, modernisation and logistics upgrades. However, it expects the company to turn net cash positive again over the medium term, supported by healthy operating cash flows from its expanded scale.
The brokerage said it remains constructive on Ambuja Cements, citing its growing scale, balanced capacity mix and improving profitability, and maintained its positive stance on the stock at ₹750 target price. “We don’t give any Holdco discount in our TP for ACC and Orient Cement,” it said.
Global brokerages have mixed but largely balanced views. JPMorgan remains cautious on the sector outlook, highlighting that the Indian cement industry is entering a phase of significant capacity expansion while demand growth is likely to stay modest, which could pressure utilisation levels.
The brokerage maintained neutral stance on both ACC and Ambuja. Morgan Stanley, in contrast, views the development more positively for Ambuja, with its board approving the merger and the proposed share swap ratios of 328:100 for ACC and 33:100 for Orient.
CLSA assigned an outperform rating on Ambuja with a target price of ₹680, while maintaining a hold rating on ACC with a target price of ₹2,035.