The purchase of a 23 percent holding by Chennai-based Ultratech Cement for Rs 1,889 crore was welcomed by The Street, which helped to drive the stock to a record high of Rs 11,875 a share on June 27. According to analysts, this transaction may pave the way for a greater share buy and the emergence of a new "Thalaiva" (dominant player) in the Southern market.

This action was taken two weeks after Penna Cements, a firm situated in South India, was announced to have been acquired by Ambuja Cements of the Adani Group for Rs 10,422 crore.

Analysts at Investec pointed out that Ultratech's acquisition would increase its capacity share in South India from 11% to 18%, especially in Telangana, where it didn't previously operate.

At the moment, India Cements can produce 14.5 million tonnes of cement annually (MTPA) and 11.13 MTPA of clinker. This is in addition to Ultratech's current Southern capacity, which are 2 MTPA in Telangana, 5 MTPA in Tamil Nadu, and 10.6 MTPA in Andhra Pradesh.

The deal, according to CLSA analysts, represents Ultratech's strategic entry point and is expected to strengthen its pricing power and industry consolidation. BofA analysts, meanwhile, believe that the investment might improve Ultratech's market prospects in the South and eventually result in a controlling share.

In two block agreements, Ultratech, the country's biggest cement manufacturer, bought 70.5 million shares of India Cements from Radhakishan Damani and associated companies for an average of Rs 268 a share. Ultratech characterised the transaction as a 'non-controlling financial investment,' despite rumors of a hostile takeover.

Research analyst Tushar Chaudhari of Prabhudas Lilladher said that both businesses might gain from the transaction. To enhance its market share in the underserved regions of Andhra Pradesh and Telangana, Ultratech might be able to acquire a strategic cement supply arrangement. Meanwhile, India Cements might experience better financial performance as volumes rise.

"We are still upbeat about the leaders of the business and anticipate that Ultratech and Ambuja Cement will keep capturing more market share. Challenges for smaller, less effective firms will result in continued cement sector consolidation. The top businesses will profit from strong financial sheets, but there will be more competition as well," he continued.

Ultratech Cement's stock has increased by more than 11% so far this year, while India Cements' has increased by 13%. In contrast, throughout the same time frame, the benchmark Nifty50 index increased by 9%.