Citigroup has reiterated its buy rating on Ambuja Cements, setting a target price of ₹625, which implies an upside of about 14% from the current market price of ₹546.75. The brokerage’s view comes after Ambuja’s board approved two schemes of amalgamation involving the merger of ACC and Orient Cement into Ambuja Cements, subject to regulatory and shareholder approvals, with completion expected within a year.
Citi noted that the transaction valuation reflects a 1% discount to ACC’s closing price as of 22 December, with an implied enterprise value of around $73 per tonne, while Orient Cement is valued at a 9% premium, at roughly $45 per tonne, compared with Ambuja’s historical acquisition cost of about $100 per tonne. The brokerage added that Ambuja’s EBITDA per tonne improvement target of ₹100 from the merger is already embedded within the group’s broader ₹500 per tonne cost reduction target by FY28 exit.
Importantly, Citi highlighted that Ambuja and ACC will continue to operate as separate brands, addressing concerns around brand dilution. The brokerage believes the merger could help reduce investor confusion over the choice of investment vehicle, future growth plans and potential grey areas within the group’s structure.
That said, Citi cautioned that the strategic impact may be limited, as ACC and Ambuja have largely been operating as a single entity from an operational standpoint. As a result, the amalgamation may not materially alter the broader investment narrative, even though it simplifies the corporate structure and improves clarity.
Overall, Citi remains constructive on Ambuja Cements, viewing the merger as structurally positive and valuation-supportive, while acknowledging that the market may see the move as more of a formal consolidation than a fundamental shift in strategy.
Disclaimer: This article is for informational purposes only. The views expressed are those of the brokerage and do not constitute investment advice or a recommendation to buy or sell any security.
