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Adani Cement: Retail flocking as value fades
1 Oct
Summary
- ACC and Ambuja shares declined, yet retail investors increased holdings.
- ACC's low PE is an illusion, investors buy Ambuja at a higher valuation.
- Ambuja Cements faces challenges in turning acquisitions into profits.
Retail investors are flocking to ACC and Ambuja Cements despite significant share price drops over the past year. ACC shares closed near their 52-week low at Rs 365, and ACC at Rs 1,204, with both down approximately 33%. Notably, ACC added 66,701 shareholders in the June 2026 quarter, and its shareholder base grew 42% in under three years. ACC, incorporated in 1936, is almost debt-free, with Rs 429 cr in borrowings against Rs 20,363 cr in reserves. A merger scheme will see Ambuja issue 328 shares for every 100 ACC shares, with market prices already reflecting this ratio closely.
Ambuja Cements, the Adani Group's flagship, boasts a capacity of 109 million tonnes per year, with plans to reach 119 million tonnes by FY27. While Ambuja also carries minimal debt, its profitability is impacted by declining margins and significant depreciation costs from acquisitions. The June 2026 quarter showed a dip in volumes and revenue for both companies. ACC's EBITDA per tonne fell significantly due to maintenance and reliance on Ambuja's cement.
Ambuja Cements' net profit growth appears inflated by tax credits and a substantial increase in depreciation. Its return on capital employed has fallen to 6%. Despite these challenges, Ambuja's shareholder count increased significantly in the June 2026 quarter. The article cautions investors that ACC's low PE is an illusion, and the real focus should be on Ambuja's ability to generate returns from its acquisitions, with a watchlist recommended for the next two quarters.
