India Cements Shares Soar 5% Ahead of Parent Ultratech's OFS

Shares of India Cements surged close to 5% on August 21 in the run up to the parent company, Ultratech Cement’s plan to offload a 6.49% stake through an offer for sale (OFS).

Ultratech’s board cleared the plan to sell up to 2.01 crore shares in India Cements at a floor price of ₹368 apiece, largely at par with the latter’s Tuesday’s closing price of ₹370. The issue opens for institutional and non-retail investors today, and retail participation will follow on Friday.

At the current price, the sale could raise around ₹740 crore for Ultratech. More than that, it will help the cement major comply with the minimum public shareholding norms by trimming its holding in India Cements to 75% from 81.49%.

India Cements, which had struggled with earnings growth slowdown in recent quarters, swung back to a positive Ebitda of ₹83 crore in the June quarter. The company has also benefited from Ultratech’s push into the southern market, which the management has touted as the ‘next North’ in terms of growth potential.

The stake sale comes just over a year after UltraTech acquired a 32.72% interest in India Cements from its promoters and followed it up with a ₹3,142 crore open offer. The Competition Commission of India cleared the deal last December, cementing Ultratech’s position as the controlling shareholder of its southern rival.

For Ultratech, the divestment is part of a broader growth story. At its annual general meeting this week, Chairman Kumar Mangalam Birla said the company is set to cross its 200 million tonne capacity target in the current financial year, a year ahead of schedule. “With nearly 70% of capital expenditure focused on growth, your company is firmly on track for a sustained trajectory in the years ahead,” Birla told shareholders.

India Cements shares ended nearly 1% lower at ₹370 in the last session. Market watchers will be tracking how investors respond to the OFS and whether the stock finds renewed momentum under UltraTech’s umbrella.