Adani Group's Ambuja Cements to acquire Sanghi Industries for Rs 5,000 cr

Purchase will entail purchase of 56.74% shares from Sanghi Industries' promoter group

Ambuja Cements, owned by billionaire Gautam Adani, said on Thursday it would buy a near 83 per cent stake in smaller rival Sanghi Industries for Rs 5,000 crore for its first acquisition after changing hands in September.

Ambuja Cements said in a filing the acquisition will entail purchase of 56.74 percent shares from Sanghi Industries' promoter group comprising Ravi Sanghi and family. The deal will be funded through internal accruals. Ambuja Cements is a debt-free company, with cash and cash equivalents of Rs 11,886 crore, as of June 2023 at the consolidated level.

"It is a good deal for Ambuja," said a cement analyst who did not wish to be identified. It is also the Adani Group's first major purchase since US short seller Hindenburg Research's report in January alleged wrongdoing at the conglomerate. The group has called the report baseless.

The acquisition will take Adani Group’s cement capacity — ACC Ltd included — to 73.6 million tonnes per annum (MTPA). The group plans to hit the mark of more than 100 MTPA by 2025, aided by the Sanghi acquisition, another 5.5 MTPA going on-stream in the second quarter of Financial Year 2022-23, and a capital expenditure of 14 MTPA. UltraTech Cement is now the only company in India with more than 100 MTPA capacity.

Also Read: Ambuja Cements gains 3% on acquisition of Sanghi Industries for Rs 5,000 cr

Ambuja Cements, in a separate stock exchange filing, said its board has approved a provision of an inter-corporate deposit to Sanghi Industries for an aggregate amount not exceeding Rs 300 crore.

India’s western market is estimated to have a cement capacity of 78.69 million tonnes as of March 2023, according to a report by Asian Market Securities. Ambuja Cements is a price leader and UltraTech tops in volume in this market.

Gujarat-based Sanghi Industries has a clinker capacity of 6.6 MTPA and a cement capacity of 6.1 MTPA, including limestone reserves of 1 billion tonnes, a captive jetty and power plant. Ambuja Cements plans to increase Sanghi’s capacity to 15 MTPA in the next two years and invest in expanding Sanghi’s captive port capacity to handle larger vessels of 8,000 DWT (deadweight tonnage).

The larger blueprint “is to produce lowest-cost clinker in the country at Sanghipuram and then transport clinker as well as bulk cement through coastal route to the market of Saurashtra, South Gujarat, Mumbai and Mumbai Metropolitan region, Karnataka and Kerala. Synergy with the assets of Adani ports will help us accelerate in implementation of this strategy,” said Karan Adani, non-executive and non-independent director of Ambuja Cements.

Also Read: Adani group to expand SIL's Sanghipuram port capacity to handle large ships

Ambuja Cements plans to create bulk terminals and grinding units along the western coast to enable movement of clinker and cement through the sea route at the lowest possible cost. Sanghi Industries has a bulk cement terminal each at Navlakhi Port in Gujarat and Dharamtar Port in Maharashtra.