The swap ratio for the merger of Sanghi Industries with Ambuja Cements is weighted in favour of the Adani group company, but analysts said that the merger is providing Sanghi shareholders a national brand, an all-India reach and an opportunity to be a part of a conglomerate.
Investors were disappointed and shares of Sanghi were down over 10 per cent in afternoon trades while Ambuja Cements shares were also trading weak.
On Tuesday, Ambuja Cements announced separate schemes of amalgamation of Penna Cements and Sanghi with itself. Shareholders of Sanghi will get 12 shares of Ambuja for every 100 held.
Penna Cements that the Adani group acquired earlier this year for $1.3 billion, is the larger entity with an annual operational capacity of 10 million ton, with four integrated plans in Andhra Pradesh and Telangana and a grinding unit in Maharashtra. It has two plants with a combined capacity of 4 million tons coming up while it has 5 bulk cement terminals.
Sanghi Industries was acquired by Ambuja in late 2023 for an enterprise value of ₹5,185 crore. With its acquisition, Ambuja expanded its clinker capacity by 6 million tonnes, cement capacity by another 6 million tonnes, got access to 1 billion tons of limestone reserves, along with a captive jetty and power plant.
“It’s a win-win situation for both the Adani group as well as Sanghi, Penna,” said Kranti Bathini, Director of Equity Strategy at WealthMills Securities. said.
With respect to the swap ratio, he pointed out that the premium was on the Ambuja side as it was a larger, national player. “From being a regional player, Sanghi is getting a national footprint while the shareholders would be part of a larger group,” he said. This would justify the lopsided share swap. With the merger, Sanghi shareholders would become shareholders of Ambuja Cement.
The move will streamline organisational structure, simplify compliance requirements, and do-away with related party transactions, said Investec Bank plc (UK) in a note on the merger.
It added that it was comforted by Ambuja Cements’ management reaffirming their growth plans, costs and synergy targets and on-going initiatives to achieve those targets.
