Two years since, Adani Cement have aimed for market inefficiencies

The entry, cement executives suggest, has either had zero impact or appears to have accelerated consolidation and its benefits for larger players

Two years after Gautam Adani’s conglomerate announced plans to acquire India’s second-largest cement maker, speculations over a likely price disruption on the sale side have since settled.

Instead, executives of major cement companies feel that entry of a big player may have helped address inefficiencies on the supply side.

In May 2022, Adani group, in a surprise move, announced it would acquire promoter stake in ACC and Ambuja Cements, which together hold the second-largest share in the market.

The entry, cement executives suggest, appears to have accelerated consolidation benefits for larger players.

“There is no effect (on prices) whatsoever. It is a consumer product, and they have to play by the market rules,” said a top executive from a major cement maker.

The view underscores the absence of any major price war for the past several quarters.

Instead, cement executives point out that the conglomerate has taken head-on the logistics, green energy and dealers distribution aspects.

“On many fronts, one needs peers like Adani. For instance, there is a renewed focus on waste-heat recovery system (WHRS). When big investors adopt that approach, the industry tends to follow,” said Madhumita Basu, chief strategy and marketing officer for Nuvoco Vistas Corp, one of the top ten manufacturers of cement in India.

Another executive from a direct competitor to Adani Cement said, “Entry of a big boy helps.” The executive added that the new entrant tried changing some long-held practices with truckers and dealers.

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Adani Cement took promoter control of ACC-Ambuja Cements in September 2022.

Soon after in December the same year, Adani made a failed attempt to reduce the trucking charges prevalent in markets such as Himachal Pradesh.

The standoff between the company and the truckers’ union ended more than a month later, with a half-way compromise on freight rates.

Back then, industry sources also noted that companies such as UltraTech Cement, which operated in the same market, gained from the negotiated changes in freight rates without losing volumes.

The executive quoted earlier also added that Adani Cement had plans to attempt changes in how dealers invoice the sale of cement.

“It wished to explore price transparency, which loosely refers to dealers letting companies know what price they sold cement at, so companies could reimburse only the difference between sold and invoiced,” the executive said.

Industry sources noted that another cement company went ahead and attempted a similar price transparency with dealers and temporarily lost market share.

Not all remains unchanged. Major capex announcements in terms of WHRS and for capacity expansion have gained momentum after Adani’s entry into the market.

Adani Cement plans to almost double capacity to 140 million tonnes per annum (MTPA) by 2028.

UltraTech Cement, the largest cement maker in India, has since announced a second round of expansion. It will take its capacity to almost 200 MTPA in the next few years.

An email query sent to Adani Cement remained unanswered.

SETTING THE STAGE

- Adani Cement attempted to reduce truck freight rates in Himachal Pradesh

- The firm tried exploring price transparency with dealers

- Company’s entry has seen competitors announce capacity expansion plans

Sources: Industry, Company