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Nuvoco Vistas Corporation (NUVOCO IN) has been selected as the successful resolution applicant for Vadraj Cement (VCL, Not Listed), which is currently under corporate insolvency resolution. We estimate investment for the acquisition will be ~INR 30bn, including refurbishment cost. VCL assets are likely to become operational by Q3FY27. After adjusting for surplus grinding capacity, the deal is estimated to be valued at an EV/tonne of ~USD 62 or ~INR 5,357, below the past two years’ average deal value of ~INR 7,833 for integrated plants. We believe this acquisition will not only provide visibility to NUVOCO’s growth prospects but also offset geographical concentration risks, which should have a positive impact on valuation multiple. Further, we expect the acquisition to become earnings-accretive by FY29. So, we reiterate Accumulate with a TP of INR 383.

Acquisition to bolster NUVOCO’s capacity by ~24%... As on end-Q3FY25, NUVOCO operates in East and North India with a combined cement capacity of ~25mn tonne. Once the acquisition is completed, consolidated cement capacity will increase by ~ 24% to ~31mn tonne by FY27E.  VCL’s existing assets include a 6mn-tonne grinding unit at Surat and a 3.5mn-tonne clinker unit at Kutch in Gujarat.

…and expands its geographical footprints: Currently NUVOCO’s regional mix is highly concentrated, with ~76% in East India and ~24% in North India. However, with this acquisition its East India exposure is set to reduce from ~76% to ~61%, from current ~24% to ~20% in North India, and from 0% to ~19% in West India (Gujarat).

Poised to become Gujarat's third-largest cement producer by capacity: As on end-FY24, Gujarat's cement capacity stood at ~38mn tonne, with the Top 3 companies controlling ~79% and the Top 5 commanding ~90% of capacity share. This strategic acquisition is likely to mark NUVOCO’s entry into Gujarat's consolidated cement market, positioning it as the third-largest firm, following the Adani Group and Ultratech Cement.

Strengthening presence across West India as well as all-India markets: Beyond Gujarat, this strategic acquisition will position NUVOCO among the Top 5 cement producers at the West India and all-India levels. This deal underscores the company’s commitment to growth and solidifying its presence in key markets nationwide.

VCL assets likely to be earnings accretive by FY29: We believe improved growth prospects and reduced geographical concentration risks will have a positive impact on the company’s valuation multiples, with the acquisition likely to become earnings-accretive by FY29. We have yet to factor in VCL’s acquisition in NUVOCO’s estimates, and we will revisit our numbers post Q3FY25 results. We reiterate Accumulate with a TP of INR 383 based on 9x September 2026E EV/EBITDA. Key downside risks are sub-par demand, weak cement prices, and a sharp rise in fuel prices.

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