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Ambuja Cements: Merger of ACC & Orient Cement to create a single entity

ICICIdirect Research 26 Dec 2025 DISCLAIMER

Ambuja Cements has approved the merger of ACC and Orient Cement with itself, which is expected to be completed over a period of 12 months after all the required approvals.
The merger swap ratio was tad favourable for Orient Cement (to the tune of ~9%) while it was largely neutral for ACC. However, the implied valuations as per swap ratio for Orient ($49/ton) and ACC ($94/ton) are considerably lower than the valuations given to these entities at the time of acquisitions (~$110/ton for Orient and ~$125/ton for ACC) thereby leading to no wealth creation in the past 3-4 years.
Though the merger will lead to ~12% equity dilution for Ambuja, we believe that the merger of all these entities (including ACC, Orient, Sanghi and Penna) will remain value accretive for Ambuja considering that it will deliver operational synergistic benefits by optimizing costs and facilitate efficient capital allocation
Ambuja is already in process of expanding its capacity to 155mtpa by FY28E (from 107mtpa at present including all entities), which would help the company in gaining its Pan-India market share. We expect better-than-industry volume growth at ~12% CAGR over FY25-28E with EBITDA/ton improvement to Rs 1207/ton (from Rs 916/ton in FY25), translating to ~26% EBITDA CAGR over FY25-28E
We have a target price of Rs 640 on Ambuja Cements, 9% lower than previous target price

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