The Competition Commission of India (CCI) has issued a notice to UltraTech Cement regarding its proposed acquisition of a significant stake in Chennai-based India Cements. This move signals the CCI’s intent to scrutinize the deal for potential anti-competitive effects in the cement industry.
Details of the Acquisition
In July 2024, UltraTech Cement, a flagship company of the Aditya Birla Group, announced plans to acquire a 32.72% equity stake in India Cements from its promoters and their associates for approximately ₹3,954 crore, pricing each share at ₹390. This acquisition followed UltraTech’s earlier purchase in June 2024 of a 22.77% stake in India Cements from Radhakishan Damani and associated entities for around ₹1,900 crore. The combined transactions would elevate UltraTech’s total stake in India Cements to over 55%, triggering a mandatory open offer to acquire an additional 26% from public shareholders, as per regulatory requirements.
CCI’s Concerns and Notice
The CCI’s notice, issued under Section 29(1) of the Competition Act, 2002, indicates concerns that the proposed combination could adversely affect competition within the relevant market. This section empowers the CCI to seek explanations from the involved parties on why a detailed investigation should not be conducted. UltraTech Cement has been granted 30 days to respond to the notice.
UltraTech’s Position
In response to the CCI’s notice, UltraTech Cement expressed confidence in the merits of its case, emphasizing the competitive and fragmented nature of the southern grey cement market, where India Cements primarily operates. The region reportedly hosts over 35 grey cement manufacturers, suggesting that the acquisition would not lead to a significant lessening of competition.
India Cements’ Response
India Cements has acknowledged the receipt of the CCI’s notice and is in the process of formulating its response. The company believes it can address any concerns the CCI may have, citing the highly competitive nature of the cement market.
Strategic Implications of the Acquisition
UltraTech’s strategic move to acquire a majority stake in India Cements aims to strengthen its footprint in the southern Indian market, particularly in Tamil Nadu, where its presence has been limited. India Cements boasts a total capacity of 14.45 million tonnes per annum (MTPA) of grey cement, with 12.95 MTPA located in the South and 1.5 MTPA in Rajasthan. This acquisition would provide UltraTech with ready-to-use assets, reducing time to market compared to initiating new projects and potentially optimizing or deferring existing expansion plans in the region.
Industry Context
The Indian cement industry is witnessing rapid consolidation, with major players like UltraTech and the Adani Group expanding capacities through acquisitions and new projects. UltraTech leads the market with a consolidated capacity of 156.66 MTPA of grey cement and aims to reach 200 MTPA by FY27. The Adani Group, following its acquisition of Ambuja Cements and ACC, aspires to achieve a capacity of 140 MTPA by FY28.
