CLSA said the proposed amalgamation of ACC and Orient Cement with Ambuja Cement is likely to deliver around 10% value accretion for shareholders, driven by valuation arbitrage and operational synergies. The brokerage has reiterated its outperform rating on Ambuja Cement with a target price of ₹680 per share, while maintaining a hold rating on ACC with a target of ₹2,035 per share.
CLSA highlighted that the boards of the respective companies have approved the transaction, with share swap ratios set at 328:100 for ACC and 33:100 for Orient Cement. According to the brokerage, ACC’s prolonged underperformance and sharp valuation discount relative to Ambuja underpin the value accretion potential for Ambuja shareholders post-merger.
The brokerage added that the amalgamation is strategically sensible as it consolidates cement operations under a single listed entity, enabling better cost optimisation, improved scale efficiencies and a clearer strategic narrative for investors. CLSA expects benefits to accrue from streamlining procurement, logistics and overhead costs, while also improving capital allocation efficiency.
However, CLSA cautioned that the transaction remains subject to multiple approvals, including regulatory clearances and minority shareholder consent. While these steps could extend the timeline, the brokerage believes the medium-term benefits outweigh execution risks, particularly for Ambuja shareholders.
Disclaimer: The views and recommendations above are those of CLSA. Business Upturn does not endorse them. Please consult a financial advisor before making investment decisions.
