Ambuja Cements’ merger plan may lift valuations and cash flows, says Nirmal Bang’s Jyoti Gupta

Ambuja Cements is becoming the preferred large-cap cement stock as industry consolidation pick up, according to Jyoti Gupta, Senior Research Analyst at Nirmal Bang Institutional Equities. She said Ambuja’s plan to amalgamate ACC and Orient Cement could unlock value for shareholders and improve operating efficiency.Gupta said the proposed merger addresses structural issues within the group and could lead to value accretion of over 12% for Ambuja shareholders, which she said is higher than some market estimates. “For shareholders, I think the valuation should be higher, more than 12% as per my numbers,” she said. She added that minority shareholders of Orient Cement could see an upside of around 7% to 8%, while the main benefit remains with Ambuja Cements.

On cost savings, Gupta noted that synergies could exceed the management’s initial guidance of ₹100 per tonne. She pointed to gains from working capital optimisation and tax benefits over the next two to three years, which could add ₹40–50 per tonne. She also highlighted the impact of cess, which she believes is not included in the company’s savings estimate and could contribute another ₹160–200 per tonne. These factors, she said, should support stronger cash flow generation.

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This outlook supports her forecast that Ambuja’s earnings before interest, tax, depreciation, and amortisation per tonne could cross ₹1,500 by 2027-28 (FY28). Gupta reiterated that Ambuja remains her top pick among large-cap cement stocks, a view she has held for the past two years. “My target price is anywhere close to ₹690,” she said, adding that it could exceed her estimate.Commenting on sector consolidation, Gupta said the top five cement players are expected to control about 65% of the market in the coming years. She added that many of the announced capacity additions are grinding or blending units and should not be seen as a major increase in supply compared with new clinker capacity.

On demand, Gupta said the outlook for the December quarter and beyond remains supportive. After a weak October, she pointed to double-digit growth in November and expects the quarter to end with high single-digit growth for the industry, with larger players doing better. Demand, she said, is strong in eastern Uttar Pradesh and the south, stable in the west, and firm in the north. “Quarter three, quarter four, and quarter one of fiscal year 2025-26 (FY26) look fine to me,” she said, adding that price hikes in January could be followed by volume growth.

For the full interview, watch the accompanying video

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