By Hritam Mukherjee and Ashna Teresa Britto
(Reuters) -UltraTech India’s top cement maker will buy an 8.69% stake in Star Cement, it said on Friday, in a deal worth up to 8.51 billion rupees ($100 million) for a company that rival Adani Group was reportedly interested in acquiring.
UltraTech said it would pay not more than 235 rupees per Star Cement share, a 2% premium to the stock’s closing price on Thursday.
Since billionaire Gautam Adani’s ports-to-power conglomerate entered the sector in 2022 to challenge Aditya Birla Group-owned UltraTech’s pole position, there has been a wave of deals as the two jostle for market share amid expectations the government will continue to spend heavily on infrastructure.
Local media had previously reported that the Adani Group was considering acquiring Star Cement, the biggest player in India’s northeast. Star has said it was not engaged in any such talks.
“Now that UltraTech has made the first move on Star, there is a little chance that Adani will pursue the deal,” said Ashutosh Murarka, an analyst with Choice Broking.
Adani Group did not immediately respond to an email seeking comment.
Star Cement’s shares initially jumped 7% to 247 rupees, above the maximum offer price, which typically indicates investors expect a higher bid or a rival offer. However, the stock has since eased to trade around the offer price.
UltraTech’s shares were off 0.4%. Shares of Adani-group controlled Ambuja Cements were flat, while those of ACC were down 1%.
UltraTech could consider acquiring a larger stake in Star Cement to boost its northeast presence and hasten the pace of meeting its capacity goals, said Murarka.
Star Cement, like many small cement firms, has suffered from the competition among the market leaders. Its annual sales growth will likely slow to 6.8% this fiscal year, from 22% in 2023, brokerage Nirmal Bang estimated. ($1 = 85.3450 Indian rupees)
(Reporting by Ashna Teresa Britto and Hritam Mukherjee in Bengaluru; Editing by Savio D’Souza)
