UltraTech Cement to Acquire 31.6% Stake in UAE-based RAK Cement

UltraTech Cement, part of the Aditya Birla Group, has announced its intention to acquire a 31.6% stake in UAE-based RAK Cement. This acquisition will be executed through UltraTech's wholly-owned subsidiary, UltraTech Cement Middle East Investments Ltd (UCMEIL).

The offer period for the acquisition will open on May 28, 2024, and remain open until June 24, 2024. The estimated timeframe for finalizing the acquisition is within 90 days from the date the offer is made. UltraTech aims to leverage its expertise in white cement manufacturing to expand RAK Cement's business locally, regionally, and globally.

Why this matters: This acquisition has significant implications for the global cement industry, as it strengthens UltraTech Cement's position and expands its presence in the Middle East. The deal is expected to introduce new products and technologies, potentially disrupting the market and affecting competitors and customers alike.

In April 2022, UCMEIL had already invested in 29.39% of RAK Cement's equity share capital. This new acquisition will further strengthen UltraTech's position in the Middle East cement market. The acquisition aims to introduce modern products such as wall care putty and other new offerings to RAK Cement's portfolio.

UltraTech Cement has a consolidated capacity of 151.6 million tonnes per annum (MTPA) of grey cement, making it the third-largest cement producer in the world. The company operates 23 integrated manufacturing units, 29 grinding units, one clinkerisation unit, and eight bulk packaging terminals. This acquisition is expected to enhance UltraTech's global presence and operational synergies.

RAK Cement, listed on the Abu Dhabi Stock Exchange, was incorporated in September 1980 and had a turnover of Rs 482.5 crore in CY21. The investment value for the 31.6% stake is estimated at $101.10 million (approximately Rs 839.52 crore). UltraTech's strategic move aims to capitalize on the growing construction demand in the region by integrating RAK Cement into its portfolio.

UltraTech Cement reported a 35.5% year-on-year increase in consolidated net profit to Rs 2,258 crore in the March quarter of FY24. Revenue reached Rs 20,418.94 crore, marking a 9.4% growth compared to the previous fiscal year. Domestic sales of grey cement rose 7% year-on-year to Rs 17,716 crore, while exports of grey cement increased by 10% year-on-year to Rs 675 crore.

Revenue from white cement grew 8% year-on-year to Rs 715 crore, and ReadyMix Concrete (RMC) revenue surged 37% to Rs 1,558 crore. EBITDA for the quarter was Rs 4,250 crore, up from Rs 3,444 crore in the same period last year. Consolidated net profit after tax for the full year soared to Rs 7,005 crore, marking a 38% surge from Rs 5,064 crore in FY23.

Net sales for FY24 totaled Rs 69,810 crore, a 12% increase compared to Rs 62,338 crore in FY23. EBITDA reached Rs 13,586 crore, showcasing a 22.4% upswing from Rs 11,123 crore in the preceding year. UltraTech Cement's shares rose by 1.36% to Rs 10,302.20 apiece on the Bombay Stock Exchange following the announcement of the acquisition.

UltraTech Cement's strategic move to acquire a 31.6% stake in RAK Cement is expected to enhance its presence in the Middle East and strengthen its position in the global cement industry. The acquisition aims to introduce new products and leverage UltraTech's expertise to expand RAK Cement's business.

Key Takeaways

• UltraTech Cement to acquire 31.6% stake in UAE-based RAK Cement.
• Acquisition to strengthen UltraTech's position in Middle East cement market.
• Deal valued at $101.10 million (approximately Rs 839.52 crore).
• UltraTech aims to introduce new products and technologies to RAK Cement.
• Acquisition to enhance UltraTech's global presence and operational synergies.