Investec initiates 'Buy' rating for Ambuja Cements with target price of Rs 950

Mumbai, Dec 18 (IANS) Global banking and wealth management group Investec on Wednesday initiated a ‘BUY’ rating for Ambuja Cements with a target price of Rs 950 from Rs 577 apiece, which is an impressive 65.1 per cent return as projected.

In a note, Investec wrote that it “finds comfort in management, reaffirming its growth goals, cost/synergy targets and on-going initiatives to achieve the same”.

“Factoring growth pipeline, lease expires (Lease wins reveal the horse to ride on), promoter’s economic interest in ACEM (Ambuja Cements), we prefer ACEM over ACC. We highlight consolidation, sustainability, ESG as key themes for the sector and find ACEM best placed to reap the gains,” Investec maintained.

With a focus on consolidation, streamlined operations, and massive production capacities, Ambuja Cement is cementing its place as a market leader and a stronger future lies ahead for investors and stakeholders alike.

Ambuja Cements’s board on Tuesday approved the merger of its recently acquired entities — Sandhi Industries Ltd. and Penna Cement Industries Ltd. — with itself through separate schemes of arrangement.

The Adani Group's cement major will issue 12 equity shares of face value of Rs 2 each for every 100 equity shares of Sanghi Industries of face value Rs 10.

The eligible shareholders of Sanghi Industries will become the shareholders of Ambuja Cements, according to an exchange filing. Subject to requisite approvals, the transaction is expected to be completed within 9-12 months, it added.

Ambuja Cements holds 58.08 per cent in Sanghi Industries and fully owns Penna Cement.

According to Investec, the move will “streamline organisational structure, simplify compliance requirements and do-away with RPTs (lated party transactions).”

Sanghi Industries, acquired by Ambuja in 2023 at an enterprise value of Rs 5,000 crore, has a clinker capacity of 6.6 million tonnes per annum, cement capacity of 6.1 MTPA, and limestone reserves of one billion tonnes.

Its Sanghipuram plant is India’s largest single-location cement and clinker unit by capacity, with a captive jetty and captive power plant.

According to Ajay Kapur, CEO of cement business of the Adani Group, the merger aims to make Ambuja Cements more competitive and efficient, with enhanced working capital management and internal funds to support business growth.