Demand environment for cement is going to be robust for FY24: Ronald Siyoni

economictimes.indiatimes.com:

«This acquisition has been in the news for quite a bit of a time and earlier the quoted figures was around Rs 6000 crores but now Rs 5000 crores seems reasonable at $100 per tonne as you said,» says Ronald Siyoni, Sharekhan.The details are out. The valuation is 5000 odd crores. They are acquiring 56% stake thereabout. What do you make of the valuation?This acquisition has been in the news for quite a bit of a time and earlier the quoted figures was around Rs 6000 crores but now Rs 5000 crores seems reasonable at $100 per tonne as you said.

So if you look at Sanghi, Sanghi had also seen quite a bit of run-up and currently till yesterday’s traded price it was around more than $80 per tonne. Most of the valuation or acquisition related trigger has been factored in Sanghi. Also if you say Ambuja Cement also the stock has seen better or in line operational performance during quarter one and this acquisition was anticipated.

So currently Ambuja's valuation is also near 16 times EV to EBITDA of FY25. So most of these large caps like UltraTech, Ambuja, they have been trading closer to their five-year historically EV to EBITDA multiple of 16 times. So yes, the acquisition is good and if the companies go for inorganic expansion that would be better for the industry compared to the organic ones because they would only increase the gas supply.

But consolidation in the industry would overall benefit the entire cement sector as a whole.Just to give some more details, of course there will be an open offer which will be involved for minority shareholders of Sanghi Industries. That will be happening at a price of 114 and that suggests it is at a premium versus what the share is trading at right now. Let us pull up the stock of Sanghi