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Ambuja Cements , one of India's largest cement manufacturers, is set to acquire a majority stake in Sanghi Industries. It will acquire a 56.7 per cent stake from the promoters for Rs 1,674 crore and another 26 per cent through an open offer. The deal will cost Ambuja around Rs 2,441 crore, which it will finance through internal accruals.
An overview of Sanghi Industries
Sanghi Industries manufactures clinker and different grades of cement. It has a cement capacity of 6.1 MTPA (million tonnes per annum), a clinker capacity of 6.6 MTPA, and limestone reserves of one billion tonnes. It operates seven manufacturing units in total, and its Sanghipuram unit is India's largest single-location cement and clinker plant.
Financials of Sanghi Industries
| Financials (₹ cr) | 2023 | 2022 | 2021 |
|---|---|---|---|
| Revenue | 928 | 1129 | 939 |
| Operating profit | -107 | 128 | 177 |
| Operating margin (%) | -11.5 | 11.3 | 18.8 |
| Net profit | -326 | 41 | 78 |
| ROCE (%) | -3.4 | 4.3 | 6 |
| ROCE is return on capital employed | |||
The rationale behind the move
The acquisition is part of Ambuja's plan to expand its total capacity to 140 MTPA by 2028. Sanghi will add 6.1 MTPA to the total capacity, taking the total to around 73.6 MTPA. Post acquisition, it plans to use Sanghi's limestone reserves to double the Sanghipuram plant's capacity in the next two years. The management also wants to transform this plant into the lowest-cost producer of clinker in India.
Only time will tell if Ambuja's plans come to fruition. However, the deal has already made shareholders of Sanghi Industries jovial. The acquisition has valued the shares of Sanghi Industries at a 13.4 per cent premium to its closing price of August 02, 2023. This led to a five per cent jump in the share price of Sanghi Industries today.
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