The purchase by Gautam Adani of cement giants Ambuja, and ACC from Holcim by Gautam Adani has triggered a rally. This has boosted both stocks and added over Rs40,000 crore to investor wealth within the last month. These cement companies clearly feel the Adani effect.
Analysts believe that the capital infusion of Rs20,000 crore could be a net benefit for Ambuja, ACC, and the cement industry, beyond its superficial aspects and Adani spin.
Overall, UltraTech and Shree Cement have outperformed Ambuja, ACC and Dalmia Bharat, even if you don't consider the recent rally in Adani Group companies.
Analysts believe that the Indian cement industry has all the ingredients for a multiyear demand upcycle. This time, however, it will be different than the 2010 cycle. The current upcycle will focus on capacity additions through consolidation rather than building new capacity.
According to a report from Kotak Institutional Equities, "The Indian cement sector will recalibrate on multiple fronts in the next three years. We expect demand, too, to see a 7% CAGR in FY 2022-26E after a tepid FY 2019-22 and keep utilization stable. Large players should remain acquisitive and aid in sector consolidation," large players need to remain acquisitive and help in sector consolidation." A Kotak Institutional Equities report noted that UltraTech Cement (and Dalmia Bharat) are "well-placed" in the long term. Morgan Stanley analysts shared similar sentiments and stated that Ambuja Cements' capital infusion is a net positive for the cement industry over the medium term.