Shares of Orient Cement surged by 14.5% in early trading on Wednesday, reaching a new 52-week high of ₹214.8 apiece. This significant increase was attributed to a media report stating that CK Birla had approached Gautam Adani to sell his promoter stake in the company.
The Economic Times, quoting sources, reported that CK Birla reached out to Gautam Adani after turning down initial offers from other domestic players that did not meet his valuation requirements.
According to the report, senior management executives on both sides have also met to discuss a potential deal for Adani, who already owns India’s second-largest cement capacity. With the recent acquisition of Sanghi Industries, Adani currently has a total cement capacity of 110 MTPA.
The talks with Adani, as per ET, have been ongoing for the past few months, but there is no guarantee of a transaction. Birla’s valuation demand, which is double the current market price, could be a deal-breaker.
The stock exchanges today sought clarification from Orient Cement with reference to the stake sale. However, Orient Cement replied that it is not privy to any such discussion and can’t comment on it.
The CK Birla Group is one of India’s most well-established and diversified conglomerates, with a rich legacy spanning over a century. The group boasts a wide spectrum of businesses across various industries, including manufacturing, automotive, healthcare, and technology.
In its latest report, domestic brokerage firm BoB Capital Markets has downgraded its rating on Orient Cement to ‘sell’ from ‘HOLD’ and assigned a target price of ₹128 apiece.
“Orient Cement has guided a capex of ₹10 billion each in FY24 and FY25 for brownfield expansion at Chittapur, Karnataka, and the relocated grinding unit at South Madhya Pradesh. The company has pared debt from ₹700 billion in FY21 to ₹4 billion in FY23, but we estimate additional borrowings of ₹10 billion–12 billion to fund the expansion, said the brokerage.
“As the contribution from fresh capacity will lag debt servicing and is likely to stabilise only post-FY25, we anticipate pressure on earnings and the balance sheet in the interim,” the brokerage added.
Disclaimer: We advise investors to check with certified experts before taking any investment decisions.
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