Adani Group Cement Acquisitions: $3 Billion Investment for Major Deals
The Adani Group is evaluating multiple cement companies for potential acquisition, including Hyderabad-based Penna Cement, Gujarat-headquartered Saurashtra Cement, the cement business of Jaiprakash Associates, and Vadraj Cement owned by ABG Shipyard. Sources familiar with the matter have revealed that the group has set aside $3 billion for these acquisitions, reflecting its aggressive strategy to boost capacity and become the largest cement manufacturer in the next three to four years, surpassing Aditya Birla Group’s UltraTech.
Inorganic Growth Strategy
The Adani Group’s inorganic growth strategy aligns with the anticipated surge in cement demand driven by the Indian government’s ambitious infrastructure development plans and record capital expenditure. Penna Cement, for instance, could be valued at around ₹9,000 crore, with its valuation potentially increasing depending on its capacity expansion from 10 million tonnes per annum (MTPA) to 15.5 MTPA.
Current Market Valuations
Saurashtra Cement has a market capitalization of ₹1,487 crore. Dalmia Bharat had previously signed an agreement in April 2022 to acquire Jaiprakash Associates’ cement, clinker, and power plants for ₹5,666 crore, but the deal stalled due to shareholder disputes. The Adani Group is reportedly offering an enterprise value (EV) of $85-120 per ton for these mid-sized cement businesses and is willing to pay a premium for companies with potential for capacity expansion, limestone mines, and packing terminals.
Recent Acquisitions
Last year, Adani acquired Sanghi Cement, which has a capacity of 6.1 MTPA, at an EV of $100 per ton. Penna Cement’s packing terminal capacity stands at 2.8 MTPA, while Saurashtra Cement has a capacity of around 5 MTPA. Jaiprakash Associates and Vadraj Cement, with capacities of 9.5 MTPA and 6 MTPA respectively, are currently undergoing bankruptcy proceedings.
Bankruptcy Proceedings
The insolvency of Jaiprakash Associates was initiated by ICICI Bank. Although the National Company Law Appellate Tribunal (NCLAT) refused to halt the process, it has considered a one-time settlement proposal submitted by the company.
Preferred Acquisition Routes
Ambuja Cement, with cash and cash equivalents of ₹24,338 crore as of April, including ₹8,339 crore from warrant money provided by the promoter, is debt-free and may be the preferred route for Adani’s acquisitions. Alternatively, Adani might choose ACC if there are better synergies, particularly in southern India where Adani has a smaller market share.
No Comments from Stakeholders
Adani declined to comment on the matter. Penna Cement and Saurashtra Cement did not respond to queries. Emails sent to the resolution professional of Vadraj Cement and the secretarial department of Jaiprakash Associates also remained unanswered.
Conclusion
Adani Group’s strategic acquisitions in the cement sector demonstrate its commitment to expanding its market presence and leveraging the anticipated growth in demand due to India’s infrastructure projects. With a substantial war chest and a focus on synergies and capacity expansion, Adani is well-positioned to become a dominant player in the cement industry.
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