Adani Group's Bold USD 3 Billion Cement Acquisition Strategy

Mumbai: The Adani Group is evaluating multiple cement companies for acquisition, including Hyderabad-based Penna Cement, Gujarat-headquartered Saurashtra Cement, the cement business of Jaiprakash Associates, and ABG Shipyard-owned Vadraj Cement, according to sources familiar with the matter.

The group has set aside a $3 billion war chest for these acquisitions, aiming to become the largest cement manufacturer in the next three to four years, surpassing the Aditya Birla Group’s UltraTech.

Targeted Acquisitions

India’s cement giants are betting on increased demand as the government pushes forward with its infrastructure development plan, driven by record capital expenditure. Sources revealed that Penna Cement could be valued at around ₹9,000 crore, with the valuation potentially increasing depending on the progress of its capacity expansion from 10 MTPA (million tonnes per annum) to 15.5 MTPA.

Premium Offers for Strategic Assets

Saurashtra Cement has a market capitalization of ₹1,487 crore. Dalmia Bharat had previously signed an agreement with Jaiprakash Associates in April 2022 to acquire its cement, clinker, and power plants for ₹5,666 crore, but the deal stalled due to shareholder disputes. It is reported that the Adani Group is offering $85-120 enterprise value (EV) 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. Last year, the group acquired Sanghi Cement, with a capacity of 6.1 MTPA, at $100 EV per ton.

Financial and Operational Strategies

Penna Cement boasts a packing terminal capacity of 2.8 MTPA, while Saurashtra Cement has a capacity of around 5 MTPA. Jaiprakash Associates and Vadraj Cement have capacities of 9.5 MTPA and 6 MTPA, respectively, and are both undergoing bankruptcy proceedings. The insolvency of Jaiprakash Associates was initiated by ICICI Bank, with the National Company Law Appellate Tribunal (NCLAT) refusing to stay the process but considering a one-time settlement proposal submitted by the company.

Preferred Acquisition Routes

Ambuja Cement is the preferred acquisition route for the Adani Group, given its cash reserves of ₹24,338 crore at the end of April and no debt. The group might also consider ACC if synergies are better, especially in southern India, where Adani has a lower market share.

Expansion Goals

The Adani Group declined to comment on these developments. Neither Penna Cement nor Saurashtra Cement responded to queries. 

After acquiring Ambuja Cements and its subsidiary ACC Ltd from Switzerland’s Holcim Group for $6.4 billion in 2022, the Adani Group now aims to increase its installed cement capacity from 79 MTPA at the end of FY24 to 140 MTPA by 2028, according to stock exchange filings.

The group, which currently holds a 14% market share, targets reaching 20% by FY28. Its internal goals are even higher, aiming for 20-40 MTPA beyond the stated guidance and achieving ₹1,500-2,000 per ton of EBITDA, compared to ₹360 per ton at the time of acquisition from Holcim, due to benefits from freight and lower energy costs through renewable energy sources.