Why GQG’s Rajiv Jain Is Doubling Down on Adani’s Ambuja Cements Amid Cement Sector Shake-Up

Ambuja Cements, part of the Adani Group led by Gautam Adani, has seen increased investment from GQG Partners, a US-based boutique investment management firm. GQG Partners, led by veteran fund manager Rajiv Jain, recently purchased 17.1 million shares of Ambuja Cements through a block deal. This move boosted GQG’s stake in the company from 1.35% at the end of June 2024 to 2.04%. As of the same period, the Adani Group held a 70.33% stake in Ambuja Cements.

Ambuja Cements’ Stock Performance

Ambuja Cements’ shares have risen by about 22% this year. Following the large deal on Friday, the stock jumped 4% in early trading to a high of ₹659.70. It eventually closed at ₹635 on the NSE, marking a modest increase of ₹3.20 or 0.51%.

Adani Group’s Strategic Moves

Recent reports suggest that the Adani Group’s promoters plan to sell shares in their listed firms to raise approximately ₹30,000 crore ($3.6 billion) over the next nine months. This move is part of their strategy to rebalance their portfolio, which is currently valued at around $126 billion.

Since October 2023, the Adani Group has invested about ₹20,000 crore in Ambuja Cements through subscription to warrants, increasing their total stake to 70.33%. Of this amount, ₹15,000 crore was invested earlier this year, while ₹5,000 crore was invested in October 2022.

GQG Partners’ Contrarian Bet on Adani Companies

GQG Partners gained attention when it invested in four Adani companies in March of last year. At that time, the Adani Group was under pressure due to accusations by the American short-seller Hindenburg Research. Rajiv Jain’s decision to invest was seen as a bold, contrarian move, but it paid off as Adani shares recovered strongly within a year.

Adani’s Cement Ambitions

Rajiv Jain’s increased investment in Ambuja Cements is closely linked to Adani’s ambitious plans in India’s cement sector. After acquiring Ambuja Cements and ACC in 2022, the Adani Group became the second-largest cement producer in India. The competition between Adani and UltraTech Cement, India’s largest cement producer owned by the Aditya Birla Group, has intensified as both companies pursue aggressive growth strategies.

Adani aims to become the largest cement producer in India within the next three to four years, surpassing UltraTech. Recently, Ambuja Cement acquired Hyderabad-based Penna Cement for ₹10,422 crore, expanding its capacity and market share in southern India. Last year, it also purchased Sanghi Industries Limited, which has India’s largest single-location cement and clinker production facility.

Future Acquisitions on the Horizon

The Adani Group is reportedly setting aside a $3 billion war chest for further acquisitions. Potential targets include Gujarat-based Saurashtra Cement, the cement business of Jaiprakash Associates, and Vadraj Cement, owned by ABG Shipyard.

UltraTech Cement is also rapidly increasing its capacity, widening the gap with Adani. UltraTech has added over 19 million tonnes of capacity in the past year and plans to add more than 35 million tonnes across 16 locations by spending ₹32,400 crore on capital expenditure over the next three years. The company reached a production capacity of 150 million tonnes earlier this year.

Adani’s Strategic Advantages

Despite UltraTech’s lead, Adani has several advantages. The group possesses 8,000 million metric tonnes of limestone reserves, a key raw material for cement production, and has secured long-term arrangements for 40% of its Fly Ash requirements, which will increase to over 50% by 2028. Additionally, Ambuja Cements has strong enterprise risk management, with 65% of its total costs benefiting from synergies with other Adani operations. Notably, Ambuja Cements remains debt-free.

India’s Cement Industry Heats Up

India’s cement industry is witnessing fierce competition as Adani and Birla harden their positions. The sector is crucial for India’s fast-paced infrastructure expansion, which includes building roads, highways, bridges, airports, and housing. India is the world’s second-largest cement producer, but its per capita consumption is only 250 kilograms compared to China’s 1,600 kilograms. This potential for growth attracted Gautam Adani to the cement business in 2022.

Most major players in India’s cement industry, including Dalmia Bharat, JK Cement, and Shree Cement, have announced plans to expand their capacities. The demand for cement in India is expected to grow rapidly, driven by government-led infrastructure projects and housing development. CRISIL predicts that India’s cement industry will add 150-160 million tonnes of capacity over the next five years, building on the 120 million tonnes added in the past five years. This capacity expansion is seen as a strategic move to meet the anticipated surge in demand as India pushes forward with its infrastructure development plans, supported by record capital expenditure.