Ultratech Strategy to maintain its leadership in Cement industry

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Sharad Gupta, MBA 2014-16, Vinod Gupta School of Management, IIT Kharagpur

Business Standard reported on 24th March, 2015, in article “Ultratech plans share swap to takeover Century’s cement arm”  about the strategy adopted by Aditya Birla’s cement group Ultratech to meet the stiff competition it is facing from Holcim-Lafarge entity. The valuation estimated of the century cement arm is approximately, 10,500 crore.

This move will make the Ultratech to retain its number one position in cement domain, adding 13 million tonnes per annum to its present capacity of 65 million tonnes. This move was a reaction to the merger of Swiss company Holcim with a Euro firm Lafarge increasing its capacity to 71 million tonnes per annum. The deal of Ultratech is awaiting the boards approval of both involved firms. Though both the firms denied any such proposals under discussion, few insiders still confirm the talks going on.
The consolidation will help both the firms in cutting costs and synergise their operations. After the proposed deal, Birla family will own more than 50% stake in Century group and stake in Ultratech will come down to 60%. With this unconfirmed news, shares of both firms rose to there local high. Even bankers believe this move will boost Century group increasing its valuation. The firm will be retaining its other businesses.
Ultratech is also increasing its capacity through acquisitions of other cement businesses. In December, it acquired Jaiprakash associates cement business, which made its overall capacity to 65 million tonnes, a little lower than its competitor.
Even if this deal doesnt turns out to be true, Ultratech will be able to reach 71 million tonnes capacity  by fiscal year 16. This will help the firm to gain its leadership position in the cement industry.

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