CCI Grants Approval for UltraTech Cement's Rs 7,000-Crore Acquisition of India Cements

The Competition Commission of India (CCI) has approved a significant deal worth over Rs 7,000 crore. This involves UltraTech Cement, led by Kumar Mangalam Birla, acquiring a majority stake in India Cements Ltd. The approval was granted shortly after the CCI issued a show cause notice to UltraTech for clarification on the proposed acquisition. This move aims to strengthen UltraTech's market position amid growing competition from the Adani Group.

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UltraTech Cement plans to acquire 32.72% of India Cements' paid-up equity share capital from its promoters and Sri Saradha Logistics Pvt Ltd. Additionally, the CCI has allowed UltraTech to make an open offer to acquire up to 26% more of India Cements' shares. This acquisition will help UltraTech expand its influence in the competitive southern cement market.

Market Dynamics and Strategic Moves

On July 28, UltraTech Cement announced its intention to purchase a 32.72% stake in India Cements for Rs 3,954 crore. This acquisition is part of a broader strategy to increase its presence in the fast-growing southern region of India. Furthermore, UltraTech has launched an open offer worth Rs 3,142.35 crore to acquire an additional 26% stake from India Cements' shareholders.

The Aditya Birla Group's flagship company stated in a regulatory filing that the CCI had unconditionally approved both the primary acquisition and the open offer under Section 31(1) of the Competition Act, 2002. UltraTech is involved in producing and selling grey cement, white cement, ready-mix concrete, clinker, and building products across India.

Competitive Landscape in the Cement Industry

The Indian cement sector is experiencing consolidation with intense rivalry between Kumar Mangalam Birla's Aditya Birla Group and Gautam Adani's Adani Group. The Adani Group is expanding its capacity with acquisitions and aims to reach 140 MTPA by FY28, close to UltraTech's current capacity of 156.66 MTPA.

Adani Cement recently acquired CK Birla group firm Orient Cement, targeting a capacity of 100 million tonnes per annum by FY25. This acquisition will boost its market share by 2%. The group has also completed acquisitions of Sanghi Industries and Penna Industries as part of its growth strategy.

Future Plans and Regulatory Approvals

The Aditya Birla Group intends to maintain its leadership with a target capacity of 200 MTPA by FY27. UltraTech is also pursuing the acquisition of Kesoram Industries' cement business and is awaiting necessary regulatory approvals.

J Sagar Associates (JSA), acting as sole counsel for UltraTech, stated that this acquisition aims to enhance UltraTech's footprint in Tamil Nadu's fragmented and competitive southern market. This marks the first unconditional approval by CCI following a show cause notice under the amended merger control regime.

This transaction was also notable as it was the first long-form Form II merger notification filed under the new merger control regime effective from September 10, 2024. The CCI took 25 days to approve this merger, according to JSA.