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The Adani Group is exploring several potential acquisitions in the cement sector, including Hyderabad-based Penna Cement, Gujarat’s Saurashtra Cement, Jaiprakash Associates’ cement business, and Vadraj Cement owned by ABG Shipyard, according to a report by The Economic Times. The Adani Group has earmarked $3 billion for these acquisitions, signalling an aggressive inorganic growth strategy, as the conglomerate strategies to become the largest cement manufacturer in India.
Currently, Adani Cement is the second-largest cement producer in India after UltraTech Cement of the Aditya Birla Group. As earlier reported by Business Standard, the group aims to surpass its rival within the next three to four years.
Adani Cement, which includes Ambuja Cement and its subsidiary ACC Ltd, has an annual production capacity of 77.4 million tonnes. This comes from its 18 integrated plants and 18 grinding units nationwide. Recently, Adani also acquired Sanghi Industries Ltd to further bolster its production capabilities.
Led by Gautam Adani, the Adani Group aims to capture one-fifth or 20 per cent of the Indian cement market by the financial year 2028. Adani Cement plans to execute an accelerated capital expenditure programme, maintaining a debt-free status while targeting a production capacity of 140 MTPA by FY2028, representing an annual growth rate of 16 per cent.
Cement companies under Adani Group scanner
Penna Cement, with a capacity expansion plan from 10 million tonnes per annum (MTPA) to 15.5 MTPA, is valued at approximately Rs 9,000 crore. Saurashtra Cement, with a market capitalisation of Rs 1,487 crore, and the cement assets of Jaiprakash Associates, valued at Rs 5,666 crore, are on Adani’s radar for future expansions.
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The group is prepared to offer an enterprise value (EV) of $85-120 per ton for these mid-sized cement businesses, potentially paying a premium for companies with capacity expansion potential, limestone mines, and packing terminals, ET added. Adani’s recent acquisition of Sanghi Cement was priced at $100 EV per ton.
Adani Cement’s push for expansion
Adani Cement’s push for expansion comes amid a government-driven infrastructure boom, with record capital expenditure expected to surge demand. The proposed acquisitions are strategic, aiming to secure energy resources, reduce costs, and enhance supply chain efficiencies.
Penna Cement, for example, offers a packing terminal capacity of 2.8 MTPA, while Saurashtra Cement has a capacity of 5 MTPA.
Jaiprakash Associates and Vadraj Cement, which are going through bankruptcy proceedings at the moment, have 9.5 MTPA and 6 MTPA capacities, respectively.
Adani’s cement sector ambitions became evident in May 2022 when it announced the acquisition of promoter stakes in ACC and Ambuja Cements, taking control in September 2022. Despite initial setbacks, such as a failed attempt to reduce trucking charges in Himachal Pradesh, the group continues to pursue expansion.
Ambuja Cement, a cash-rich entity with Rs 24,338 crore on its books, is expected to spearhead future acquisitions. The group might opt for ACC in regions like southern India where it seeks to increase its market share.
