Adani Group's Rs 3,000 crore bet on ITD rides India's infra-capex wave

Group entity will acquire 46.64% in EPC firm, triggering an open offer

Adani Group’s acquisition of a controlling stake in ITD Cementation India through a Rs 3,204 crore deal marks the conglomerate’s entry into the engineering and construction (EPC) sector. With this purchase, the group aims to leverage its capital expenditure (capex) along with India’s infrastructure spending, sources said.

 

ITD Cementation India will support the execution of Adani Group’s planned Rs 1.5 trillion capex and take on key infrastructure projects for the government and private entities, according to a source.

 

On Saturday, ITD Cementation announced that Adani Group’s Dubai-based firm, Renew Exim DMCC, has entered into an agreement to acquire a 46.64 per cent stake in the company from its promoters for Rs 3,204 crore. This will trigger an open offer, in line with market regulatory requirements.

 

As part of the transaction, priced at Rs 400 per share, the current promoter, Italian-Thai Development Public Company, will relinquish its promoter status, making Adani Group’s Dubai-based Renew Exim DMCC the new promoter, subject to government clearances.

 

Further, Renew Exim DMCC, owned by billionaire Vinod Adani, will make an open offer to acquire an additional 26 per cent stake at Rs 571.68 per share, compared to ITD Cementation’s closing price of Rs 532 on Friday. If all shareholders tender their shares, the open offer will cost Adani Group another Rs 2,553 crore.

 

With its entry into the EPC segment, Adani Group will compete with other established firms in the sector, including India’s largest engineering conglomerate, Larsen & Toubro (L&T).

 

Currently, L&T’s order book exceeds Rs 4.9 trillion as of June 2024, overshadowing ITD Cementation’s Rs 18,536 crore. However, potential synergies between ITD Cementation and Adani Group’s capex plans could shift this dynamic. ITD’s order book as of June also includes road, marine, and hydropower projects that the company is executing for the Gautam Adani-promoted conglomerate.

 

At present, Adani Group’s infrastructure portfolio spans airports, roads, power plants, and ports. Its 2022 acquisition of Ambuja Cements made it India’s second-largest cement manufacturer overnight, adding a crucial construction raw material to its value chain.

 

The latest acquisition of ITD Cementation further strengthens Adani Group’s engineering capabilities across its port-to-airports infrastructure value chain. ITD Cementation has a long history of building Metro projects in India, also a missing piece in Adani’s infrastructure play.

 

In the past, large firms like L&T have also ventured into owning and operating the assets they contract to build, such as the Dhamra Port in Odisha. However, L&T later adopted an asset-light strategy, divesting from owned assets, including the Dhamra Port and a portfolio of road assets.   

Deal Contours

 

> This marks Adani group’s entry into the engineering and construction segment

> Second deal announcement from the group this month, after Ambuja Cements agreed to buy Orient Cement

> To pick the stake in the firm from its promoters for Rs 3,204 crore

> To make an open offer to acquire a further 26% stake, to cost another Rs 2,553 crore