Adani Group’s $3 Billion Cement Buyout Plan

Mumbai: The Adani Group is planning major acquisitions in the cement industry, targeting companies such as Penna Cement, Saurashtra Cement, the cement division of Jaiprakash Associates, and Vadraj Cement owned by ABG Shipyard, according to sources. They are setting aside $3 billion for these purchases, aiming to become the top cement manufacturer in the next three to four years, surpassing UltraTech from the Aditya Birla Group. The group is betting on rising cement demand due to India’s focus on infrastructure development and increased capital spending.

Target Companies and Valuations

• Penna Cement: Valued at around ₹9,000 crore. This valuation could rise as Penna expands its capacity from 10 MTPA (million tonnes per annum) to 15.5 MTPA.
• Saurashtra Cement: Has a market capitalisation of ₹1,487 crore.
• Jaiprakash Associates: Previously agreed to sell its cement assets to Dalmia Bharat for ₹5,666 crore, but the deal stalled due to shareholder disputes.
• Vadraj Cement: Capacity of 6 MTPA and currently in bankruptcy.

Acquisition Strategy

The Adani Group is looking to pay $85-120 per ton of enterprise value for these mid-sized cement businesses and might offer more for companies with growth potential, limestone mines, and packing terminals. The group recently acquired Sanghi Cement for $100 per ton, reflecting its readiness to invest significantly in capacity expansion.

Financial Position and Preferred Routes

Adani’s subsidiary, Ambuja Cement, with cash reserves of ₹24,338 crore, is likely to be the primary vehicle for these acquisitions, leveraging its strong financial position and absence of debt. Adani might also use ACC for acquisitions, especially where there are better synergies, notably in southern India.

Current Status of Target Companies

• Penna Cement: Has a packing terminal capacity of 2.8 MTPA.
• Saurashtra Cement: Capacity of about 5 MTPA.
• Jaiprakash Associates: Capacity of 9.5 MTPA and facing bankruptcy initiated by ICICI Bank. The NCLAT has refused to halt the insolvency process but is considering a one-time settlement proposal.
• Vadraj Cement: Also in bankruptcy proceedings.

Comments and Responses

The Adani Group declined to comment. Queries sent to Penna Cement, Saurashtra Cement, and Vadraj Cement’s resolution professional went unanswered. Jaiprakash Associates did not respond either.

The Adani Group is aggressively moving towards expanding its cement manufacturing capabilities by acquiring several mid-sized cement companies. With a significant investment of $3 billion, they aim to lead the Indian cement market by focusing on companies with strong potential for growth and expansion.