Shares of UltraTech Cement Ltd experienced a decline of over 2% in early Thursday trading following a substantial block deal. Approximately 0.8% of the company's total equity was traded, prompting a dip in its stock price.
Reports indicate that Pilani Investment and Industries Corporation Ltd, a key entity within UltraTech's promoter group, was the likely seller in this transaction. Earlier term sheets revealed that Pilani Investment intended to offload 17 lakh UltraTech shares, representing 0.57% of the total outstanding shares.
Details of the Block Deal
The shares were offered at a floor price of Rs 11,481, which marked a 3% discount compared to Wednesday's closing price. The total deal size was estimated at Rs 1,908.50 crore, or approximately $200 million. Jefferies India served as the sole bookrunner for this large-scale transaction.
At 9:22 am on Thursday, UltraTech Cement shares were trading at Rs 11,636 apiece, reflecting a 2.14% drop. Prior to this deal, Pilani Investment held a 1.5% stake in UltraTech Cement as of June 30.
Analyst Outlook Remains Positive
Despite the immediate share price dip, financial analysts maintain a positive long-term outlook for UltraTech Cement. MOFSL, a prominent brokerage, noted in a recent report that UltraTech Cement continues to generate robust operating cash flows.
“UltraTech Cement has continued to generate strong operating cash flows, supported by aggressive capacity expansion, higher capacity utilization, and timely integration of large acquisitions,” MOFSL stated.
The company's operating cash flow surged 43% year-on-year to Rs 15,300 crore in FY26, surpassing its EBITDA growth of 36% to Rs 17,000 crore. MOFSL highlighted UltraTech’s consistent cash flow conversion ratio, which has remained in the 80-100% range between FY21-26, attributed to disciplined working capital management.
Future Growth and Debt Projections
MOFSL anticipates UltraTech Cement will continue to generate strong free cash flow, projecting cumulative operating cash flow of Rs 33,100 crore over FY27-28, an increase from Rs 26,000 crore in FY25-26. The brokerage also estimated cumulative capital expenditure of Rs 20,000 crore over FY27-28.
Net debt is expected to peak at Rs 18,500 crore in FY27 before declining from FY28 onwards, with the net debt-to-EBITDA ratio projected to remain below 1x through FY27-28. Based on these strong fundamentals, MOFSL has issued a 'Buy' rating on UltraTech Cement, setting a target price of Rs 13,800 for the stock.