Adani Cement Merger: Ambuja to Absorb ACC and Orient

Adani Group Announces Major Cement Consolidation

The Adani Group has initiated a significant consolidation within its cement business, with flagship company Ambuja Cements set to merge with its subsidiaries ACC Limited and Orient Cement Limited. The Board of Directors has approved two separate amalgamation schemes to create a single, powerful entity branded as the 'One Cement Platform'. This strategic move is designed to simplify the corporate structure, enhance operational efficiencies, and solidify the group's position as a leading player in the Indian cement industry. The transaction will be entirely share-based, with Ambuja Cements issuing new shares to the minority shareholders of ACC and Orient Cement.

Karan Adani, Non-Executive Director of Ambuja Cements, described the consolidation as a "transformational step" toward building a globally competitive and integrated building materials organization. The merger aims to leverage the combined strengths of the three companies to drive growth, improve productivity, and deliver long-term value to shareholders. The unified structure is expected to create a more agile and financially robust company, better positioned to support future expansion initiatives.

The Merger Structure and Share Swap Details

The amalgamation will be executed through a share swap arrangement, with specific ratios determined for the shareholders of both ACC and Orient Cement. There will be no cash payout involved in the transaction.

For ACC Limited shareholders, Ambuja Cements will issue 328 new equity shares (face value ₹2 each) for every 100 equity shares held in ACC (face value ₹10 each). This translates to a swap ratio of 100:328.

For Orient Cement Limited shareholders, Ambuja Cements will issue 33 new equity shares (face value ₹2 each) for every 100 equity shares held in Orient Cement (face value ₹1 each), resulting in a swap ratio of 100:33.

The appointed date for the ACC merger is set for January 1, 2026, while the appointed date for the Orient Cement merger is May 1, 2025. The entire process is subject to requisite approvals from shareholders, creditors, the Securities and Exchange Board of India (SEBI), and the National Company Law Tribunal (NCLT). The company anticipates the transaction will be completed within a 12-month period.

Strategic Rationale and Expected Synergies

The primary driver behind this consolidation is the potential for significant operational and financial synergies. Management projects cost savings of at least ₹100 per tonne through optimized manufacturing, streamlined logistics, and reduced corporate overheads. A key benefit will be the elimination of the existing Master Supply Agreements (MSAs) and related-party transactions between the entities, which is expected to enhance transparency and improve corporate governance standards. By bringing all operations under a single corporate umbrella, the Adani Group aims to enable faster decision-making and more efficient capital deployment.

Despite the merger, the strong brand identities of 'Ambuja' and 'ACC' will be retained and continue to operate independently in their respective markets. Furthermore, state-level incentives currently available to ACC are expected to continue for the merged entity, ensuring financial continuity. The simplified structure will allow for better capacity utilization across a pan-India network and a stronger platform for future expansion.

Ambitious Capacity and Cost Reduction Goals

This merger underpins the Adani Group's aggressive growth strategy for its cement business. Ambuja Cements is targeting a substantial increase in its total production capacity, aiming for 118 million tonnes per annum (MTPA) by FY26 and 130-135 MTPA by FY27. The company recently upgraded its FY28 capacity target from 140 MTPA to 155 MTPA. This expansion will be achieved through a combination of debottlenecking existing plants and adding new facilities, with a projected capital expenditure of approximately $18 per tonne.

Alongside capacity growth, the company has set firm cost reduction targets. The goal is to lower the total cost per tonne to ₹4,000 by FY26, followed by further reductions to ₹3,800 by FY27 and between ₹3,600-₹3,650 by FY28. These efficiency gains are expected to drive profitability, with management guiding for an EBITDA per tonne of ₹1,450-₹1,500 by FY28.

Market Reaction and Shareholder Impact

The market responded with distinct reactions for each of the three companies involved. Orient Cement shares surged nearly 10% as investors viewed the 9% premium embedded in the swap ratio as highly favorable for its minority shareholders. In contrast, ACC shares traded lower, as the swap ratio was perceived as valuation-neutral with no immediate premium. Ambuja Cements' stock gained modestly, reflecting investor confidence in the long-term strategic benefits of the consolidation.

For existing Ambuja shareholders, the deal will result in an equity dilution of approximately 12-13% after accounting for all announced mergers. The promoter group's holding is expected to decrease from 67.65% to 60.94%. However, analysts believe the merger will be earnings-accretive, as it consolidates ACC, which trades at a significant valuation discount to Ambuja. For ACC shareholders, the deal offers a neutral exit into a larger, more diversified entity, while Orient Cement's minority shareholders are the clearest beneficiaries with a direct premium and access to a stronger platform.

Analyst Commentary and Future Outlook

Brokerages have largely responded positively to the merger, maintaining 'BUY' ratings on Ambuja Cements. Analysts at JM Financial and Axis Direct highlighted the enhanced operating efficiency and improved transparency. Motilal Oswal noted that the deal removes uncertainties about merger timelines and creates a single pure-play cement entity for the Adani Group. Target prices for Ambuja Cements from various brokerages range from ₹630 to ₹750 per share.

While the strategic vision is clear, the successful integration of plants, systems, and personnel remains a key execution challenge. The final step hinges on securing all necessary regulatory and shareholder approvals. Once completed, Ambuja Cements will stand as the Adani Group's sole listed cement vehicle, poised to leverage its expanded scale and enhanced efficiencies to strengthen its leadership in the Indian market.