Orient Cement Shares Soar on CK Birla’s Stake Sale Speculation

Orient Cement Shares Soar on CK Birla's Stake Sale Speculation

VoM News Desk | October 18, 2023 | 12:40 PM IST | Breaking News | Follow on Google News

Orient Cement Shares Soar on CK Birla’s Stake Sale Speculation

Orient Cement Shares Soar on CK Birla’s Stake Sale Speculation

In early trading on Wednesday, Orient Cement’s shares witnessed a remarkable surge of 14.5%, hitting a new 52-week high at ₹214.8 per share. This significant uptick was attributed to media reports indicating that CK Birla, the promoter of the company, had approached Gautam Adani with intentions to sell his stake.

CK Birla’s Pursuit of a Buyer

Reported by The Economic Times, sources revealed that CK Birla initiated contact with Gautam Adani after rejecting initial offers from other domestic players that fell short of his valuation requirements. These discussions are seen as part of CK Birla’s efforts to divest his stake in Orient Cement.

Adani’s Cement Empire and Expansion Talks

Adani, who already owns India’s second-largest cement capacity, has been in talks regarding a potential deal. His recent acquisition of Sanghi Industries has expanded his total cement capacity to 110 million metric tonnes per annum (MTPA). While discussions between the two sides have been ongoing for several months, there is no guarantee of a finalized transaction. A significant stumbling block may be CK Birla’s valuation demand, which is twice the current market price.

As of the September 2023 quarter, CK Birla held a 37.9% stake in Orient Cement. The CK Birla Group, known for its long-standing and diversified presence in Indian business, operates across various industries, including manufacturing, automotive, healthcare, and technology.

Brokerage Firm’s Downgrade

In response to the potential sale, domestic brokerage firm BoB Capital Markets has downgraded its rating on Orient Cement to ‘sell’ from ‘hold.’ They have also assigned a target price of ₹128 per share. The company has outlined a substantial capex plan for FY24 and FY25 for brownfield expansion in Karnataka and the relocation of a grinding unit in South Madhya Pradesh. While Orient Cement has reduced its debt from ₹700 billion in FY21 to ₹4 billion in FY23, the brokerage anticipates additional borrowings of ₹10 billion to ₹12 billion for funding the expansion. This expansion is expected to bring pressure on earnings and the balance sheet, likely stabilizing post-FY25.

VoM News Desk

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